COFCO Transfers Two Biofuel Subsidiaries to Parent Company Unit

China’s largest seller of foodstuffs is continuing its restructuring, transferring two of its biofuel subsidiaries to a sister company.

A unit of state-owned China National Cereals, Oils and Foodstuffs Corp. (COFCO) said Monday it has sold COFCO Biofuel Holdings Ltd. and COFCO Biochemical Holdings Ltd. to COFCO Bio-chemical Investment Co. Ltd.

The sale price was HK$8.6 billion ($1.1 billion), according to a filing to the Hong Kong Stock Exchange on Monday by COSCO’s China Agri-Industries Holdings Ltd., the unit that had originally held the two subsidiaries.

The interests of the two biofuel firms include the production and sale of corn-based ethanol fuel, as well as feed ingredients and crude oil.

COFCO has completed similar asset transfers several times over the past two years, involving a chateau, edible oil brand Fortune and wine label Great Wall.

A COFCO employee told Caixin that the enterprise is undergoing a major restructuring of its many scattered subsidiaries, and will arrange them into 18 firms with clearer focuses on different sectors to avoid cross-sectoral company ownership.

For example, new owner COFCO Bio-chemical Investment — which has greater experience in the biofuel industry — may better lead the two companies through mounting challenges in the sector, notably the phasing out of government subsidies.

Government grants for corn-based ethanol were discontinued in 2016, and subsidies for ethanol fuel producers will be ended in 2018, China Agri-Industries said in its filing.

Subsidies received by the two biofuel subsidiaries totaled at 599 million yuan ($90 million) last year, down 30% from a year before.

Shares of Hong Kong-listed China Agri-Industries were up 1.87% by close of trading Wednesday.

Contact reporter Coco Feng (renkefeng@caixin.com)