Foreword Under the wave of state-owned enterprise reform, although COFCO Group's pilot plan for a state-owned capital investment company has not yet been officially disclosed, the relevant reform strategies, goals, and directions are gradually coming to light. Ning Gaoning and the COFCO he steers have once again become the focus. Recently, a management source at COFCO Group disclosed that as early as the first half of this year, COFCO's pilot plan for a state-owned capital investment company had been completed. The core content starts with equity diversification, introducing industrial, fund, private, and foreign capital, while "through methods such as internationalizing the full industry chain, spinning off business segments for listing, and introducing professional managers, COFCO will be built into a state-owned capital investment company with grain, oil, and food as its core business." In July last year, the State-owned Assets Supervision and Administration Commission (SASAC) announced the first batch of central enterprise reform pilot enterprises, and COFCO became a pilot unit for restructuring into a state-owned capital investment company. In fact, since Ning Gaoning parachuted into COFCO in 2004, reform has never stopped. "If state-owned enterprises are a cow, then we are the cowherd." This is a widely circulated famous saying by Ning Gaoning, chairman of COFCO Group. During his 11 years at the helm of COFCO, the "cowherd" Ning Gaoning has deeply imprinted his style into COFCO's development history. During his 11 years at COFCO, Ning Gaoning continuously expanded COFCO's "plate" through a series of capital operations. Currently, COFCO has 11 listed companies under its umbrella, with business scope covering planting and breeding, agricultural product storage and logistics, grain, oil, and food trading, agricultural product processing, slaughtering and meat processing, real estate, hotels, and other fields. While expanding its scale, Ning Gaoning's reforms at COFCO also cover equity mechanisms, professionalization of business splits, and overall listing plans. On September 24, the State Council issued the "Opinions on Developing Mixed-Ownership Economy in State-Owned Enterprises," making mixed-ownership reform a key point of state-owned enterprise reform. A COFCO management source stated that according to the state-owned enterprise reform opinions, it is expected that within the year, COFCO will announce the completed pilot plan for a state-owned capital investment company, while accelerating the introduction of external capital and the pace of spinning off business segments for listing. In fact, from joining forces with Hopu Fund to acquire Mengniu, to establishing joint ventures with France's Danone Group, Ning Gaoning has already led COFCO in attempts at mixed-ownership reform. Ma Wenfeng, an analyst at Eastern AgGroup, analyzed that COFCO's previous experience in mixed-ownership reform is one of the reasons it was included by SASAC as a reform pilot. Ning Gaoning's Imprint Ning Gaoning's resume is somewhat legendary. At age 41, he became chairman of the board of China Resources Group. Through a series of strategic mergers and acquisitions, spanning real estate, retail, and other industries, he made China Resources well-known in mainland China with his skilled capital operation methods, and was once called China's "Morgan." In 2004, at age 46, Ning Gaoning "parachuted" into COFCO as chairman. Before Ning Gaoning, although COFCO Group was among the Fortune 500, it had only one listed company, and financing had always been a shortcoming for this old central enterprise. In the following two years, Ning Gaoning successively completed mergers and acquisitions of enterprises such as Xinjiang Tunhe, Shen Baoheng, China Resources Alcohol, COFCO (China) Group, and BBCA Biochemical, and completed the listing of multiple companies such as China Agri-Industries in Hong Kong, finally introducing international capital market supervision and evaluation mechanisms into COFCO. Today, COFCO Group has 11 listed companies under its umbrella. Among them, COFCO Tunhe, COFCO Property, Jiugui Liquor, and COFCO Biochemical are listed on the A-share market, while China Agri-Industries, China Foods, COFCO, and Mengniu Dairy have chosen to list in Hong Kong. The 2014 Corporate Social Responsibility Report of COFCO Group, published in June this year, shows that COFCO Group's total assets reached 458.2 billion yuan, an increase of 6.66 times compared to 59.8 billion yuan when Ning Gaoning first took office. Since Ning Gaoning took charge of COFCO, the acquisition of Mengniu has been most talked about by the outside world. On July 6, 2009, COFCO, together with Hopu Fund, invested HK$6.1 billion in Mengniu Dairy, creating the largest deal record in the domestic food industry to date. According to the agreement, COFCO Group and Hopu Fund jointly established a new company, subscribing to 173.8 million new shares of Mengniu Dairy at a cash price of HK$17.6 per share, and also subscribing to 10% of the expanded issued share capital from old shareholders. After the acquisition, the joint venture held 20% of Mengniu Dairy's shares, becoming its largest shareholder. After taking a stake in Mengniu Dairy, COFCO, Hopu Fund, and Mengniu signed relevant agreements, promising that after the equity transaction, COFCO would not participate in Mengniu's specific daily operations and management, and Ning Gaoning himself would only serve as a non-executive director. In June 2011, Ning Gaoning succeeded Niu Gensheng as chairman of the board of Mengniu Dairy, beginning to manage Mengniu. As the founder of Mengniu Dairy, Niu Gensheng resigned as chairman of the board, marking the end of the "Niu Gensheng era." Since Ning Gaoning took office, from taking a stake in Mengniu for dairy products, to acquiring Joy City for commercial real estate, to COFCO Fortune (Fulinmen), these companies acquired through capital conquest are now leaders in their respective industries. From 2005 to 2013, Ning Gaoning completed 50 mergers and acquisitions at COFCO, with an investment amount of 14.6 billion yuan. From total assets to business scope, COFCO's scale has grown larger and larger, which is undoubtedly inseparable from Ning Gaoning's adeptness in the capital market. "During that period, COFCO needed to quickly expand its plate and continuously extend its business, which strongly promoted COFCO's development, but now this model may not necessarily suit COFCO," Zhu Boshan, chief consultant at Shanghai Tianqiang Management Consulting Co., Ltd. and a state-owned enterprise expert, told reporters. With the expansion of scale, overall listing gradually came onto the agenda. In March 2008, Ning Gaoning stated that COFCO would achieve overall listing within two to three years. According to Ning Gaoning's thinking, COFCO would split its businesses to form specialized companies, and by listing all specialized companies, achieve the group's overall listing. Three years later, Ning again proposed that after the merger of COFCO's two real estate business platforms, COFCO Property and COFCO Real Estate, the group would achieve overall listing through an A+H approach. The complex business system and increasingly large scale caused Ning Gaoning's plan to be repeatedly delayed. This time, the plan for COFCO's overall listing has been mentioned again, reflecting to some extent Ning Gaoning's precise grasp of policy. The Economic Observer, citing a COFCO management source, reported that COFCO will roughly follow categories such as grain and oil, food, real estate, and finance, adopting a "combining similar items" approach to split and integrate the 11 listed companies. However, this has not been officially confirmed by COFCO. Regardless of the specific implementation time of this plan, COFCO's development over the past decade or more has been deeply imprinted with Ning Gaoning's color. Investment and M&A Boost Reform COFCO's specific reform plan has been slow to appear, but reform is still expected to focus on mixed-ownership reform and business splitting. Reporters made multiple calls to Yin Jianhao, secretary of the board and spokesperson of COFCO Group, but no one answered. A COFCO internal management source revealed that COFCO's reform pilot plan was completed in the first half of the year, with equity diversification, full industry chain, business segment spin-offs for listing, and introduction of professional managers still being key words. In the reform plan, COFCO International, jointly established by COFCO and CIC, plays an important role. "COFCO International is currently still an investment platform, and its investments include Nidera and Noble Agriculture. COFCO's original grain, oil, and sugar assets have not yet been injected," said Yu Xubo, president of COFCO Group. COFCO plans to inject COFCO's original grain, oil, and sugar assets into COFCO International by 2019, achieving integration and overall listing of the three parties' assets. In February and April 2014, COFCO announced the acquisition of 51% of the equity of Dutch agricultural products and commodity trading group Nidera and 51% of the equity of Noble Agriculture under Hong Kong's Noble Group, with the two acquisitions costing about US$3 billion, making it the largest overseas acquisition in the domestic grain, oil, and food industry to date. Nidera is a well-known agricultural products and commodity trading group, engaged in grain distribution and international trade in 18 major importing and exporting countries, with advantages in controlling South American grain sources and core technology in seed business; Noble Agriculture is the agricultural business platform under Hong Kong's Noble Group, mainly engaged in agricultural product trading and processing, with advantages in logistics asset layout in key regions and the industrial chain of the sugar business. Through the above acquisitions, COFCO has initially formed a global agricultural product supply chain layout, with international business volume exceeding domestic business volume, becoming a truly international grain trader. Ning Gaoning confidently stated to the outside world that in the next three years, COFCO will integrate with Nidera and Noble Agriculture. The management teams of the three parties will first achieve business integration, forming a company with a unified goal, and after integration is completed, form one company and IPO in the capital market. Reporters learned that in the future, COFCO will, on the one hand, accelerate investment in North America, and on the other hand, plan to complete the integration of COFCO's domestic assets with Nidera and Noble Agriculture by 2017. After integration, COFCO will become a world-class company competing with ADM, Bunge, Cargill, and Louis Dreyfus. Undoubtedly, COFCO's acquisition of Nidera and Noble Agriculture is a typical state-owned capital investment behavior. For state-owned enterprises, the most important thing in carrying out state-owned capital investment is to introduce various external capital, and COFCO Group, under Ning Gaoning's leadership, has been frequently making acquisitions. Following the joint acquisition of 20% of Mengniu Dairy with Hopu Fund, COFCO cooperated with France's Danone Group twice in May 2013 and February 2014, establishing joint ventures and introducing Danone into Mengniu, making Mengniu a typical example of multi-ownership common development. "In fact, COFCO has been a practitioner of mixed ownership from the very beginning. It's just that in this round, its mixed-ownership reform has become more thorough and market-oriented," Ma Wenfeng, an analyst at Eastern AgGroup, told reporters. In his view, COFCO was initially included in the pilot because it had relatively rich experience and significant results in mixed-ownership practice. Pros and Cons of Overall Listing In addition to investment and acquisitions, Ning Gaoning is also very skilled at introducing foreign funds. In June 2014, COFCO Meat cooperated with institutions such as KKR and Baring Private Equity Asia to invest US$270 million in China to build large-scale pig farms and meat processing plants; in August, COFCO Womai.com received investment from IDG and SAIF Partners, completing financing of US$100 million for expansion in fresh food cold chain and other related areas. In daily investment and M&A business, COFCO has established long-term cooperative relationships with large international investment institutions such as Hopu Fund, Temasek, and Standard Chartered Private Equity. Among them, Hopu Fund has been involved in the investment in COFCO Meat and the acquisitions of Nidera and Noble Agriculture. In May this year, COFCO Group introduced funds from CIC, transferring 20% of COFCO International's shares to CIC, with COFCO International holding 80%. In the future, COFCO International will also become the platform for COFCO Group's overall listing. It is worth mentioning that after completing the acquisitions of Nidera and Noble Agriculture, COFCO Group also made moves in introducing professional managers. On May 12, COFCO announced the appointment of Matt Jansen as CEO of COFCO Noble. Before joining COFCO Noble, Matt Jansen was a senior vice president of ADM, one of the world's largest corn and wheat processors, and also served as general manager of ADM's global oilseed division and chief risk officer. With the acceleration of COFCO International's M&A pace and the diversification of equity ownership of its subsidiaries, Ning Gaoning's plan for overall listing, proposed in early 2008, has finally gained clear direction. Overall listing first requires partial adjustments to the existing 11 listed companies. From the information learned, COFCO may integrate the listed company cluster by "combining similar items" according to multiple categories such as grain and oil, food, real estate, and finance. When Ning Gaoning set the plan for overall listing, he also clearly stated the internal adjustment goals for COFCO, namely, within two to three years, adjust COFCO's core business to five to six business units or business groups. Previously, from the movements of COFCO Group's subsidiaries such as COFCO Tunhe and Jiugui Liquor, it can be seen that COFCO has begun to split and integrate the business of some listed companies. Among them, COFCO will merge the sugar business of Huafu Group into COFCO Tunhe, which will serve as the only platform for COFCO's sugar business development. In addition, for Jiugui Liquor, COFCO is also planning to use it as a platform to continue acquiring related liquor companies and continuously expand its presence in the baijiu market. Since it was proposed in 2008, COFCO Group's overall listing plan has finally made substantial progress. In fact, for COFCO, which has been continuously investing and acquiring, it does have an urgent need for capital. According to data released by COFCO, from 2011 to 2014, COFCO Group's asset-liability ratio was above 60%, at a relatively high level. If overall listing can be achieved and large amounts of funds raised, it will boost COFCO's transformation into a state-owned asset investment company. "With overall listing, the market will have an overall assessment of COFCO, and of course, it can also obtain more funds from the capital market. But regardless of the end point of the reform, there is a bottom line: the preservation and appreciation of state-owned assets. Enterprises need to be profitable, cannot become smaller and smaller, and cannot end up becoming someone else's. This is the bottom line of state-owned enterprise reform," Ma Wenfeng told reporters. "Putting eggs in 49 baskets is not to spread risk, but to be the leader in many different industries." Another famous saying by Ning Gaoning is almost a true portrayal of his more than ten years at the helm of COFCO. However, under the background of state-owned enterprise reform, Ning Gaoning now has to concentrate the eggs he has placed in multiple baskets into one basket one by one, a process that is longer than he imagined. Overall listing has both advantages and disadvantages. In the past, to seek development, it was necessary to have someone like Ning Gaoning to quickly expand the plate. Times have changed, and now this approach may not be suitable. Under the reform background, it is necessary to gradually retract the plate and manage it centrally. -END- Click on the title below to read directly: