Chinese state-owned oil and chemical producer Sinochem Corporation is reportedly in early talks to acquire Noble Group, sources familiar with the matter told Reuters on Tuesday, in a move that would help it gain access to the embattled commodity trader's global supply chain.
Having a stake in an internationally active trading house like Noble would help Sinochem, one of China's biggest oil, gas, and petrochemical producers, in its ambitions to become a more active global player as well as develop China's gas sector, Reuters said in its report.
The discussions come as the Singapore-listed Noble looks to reign in its business units, reduce debt, and boost liquidity amidst a long-term downtrend in commodity prices.
In November, the Hong Kong-based trader said it has reached its capital raising target of $2 billion as it sold assets, completed a rights issue and restructured its operations.
The sources, who declined to be identified as they were unauthorized to speak to the media, told Reuters that the talks are still ongoing and there is no assurance that a deal will be finalized.
Senior Noble executives visited China in recent months to meet with Sinochem's management, and both sides also held talks at Noble's U.S. regional office in Stamford, Connecticut, they added.
Sinochem did not immediately return a request for comment.
In response to the Reuters report, Noble told the Singapore Stock Exchange on Tuesday that it was holding talks but did not provide additional details.
"The board wishes to advise that Noble Group is currently engaged in discussions regarding a possible strategic investment in Noble Group," the company said in a statement.
"However, no binding arrangements have as yet been entered into with respect to this possible transaction and, accordingly, there can be no assurance that this transaction will be concluded."
The size of the planned stake or the amount to be invested by Sinochem has not yet been finalized, and any deal will face intense scrutiny in China as authorities there try to control capital outflows, sources said.
A Sinochem source told Reuters that the company is still reviewing its deal with Noble, which could take up to a year.
The company is looking at Noble's North America energy trading business, which could boost Sinochem's existing portfolio, he added.
Noble specializes in shipping and storage logistics, rather than owning refineries and other large production assets, and has also been a major player in the gasoline blending sector in the U.S.
Noble is also eyeing Asia's emerging liquefied natural gas (LNG) market for its core growth and trading potential, while Sinochem is expected to play a key role in China's plans to expand its natural gas sector and reduce its share of coal in its energy portfolio, Reuters reported.