--Move teams World Bank's investment arm with commodities firm once responsible for driving up cocoa prices
--Stated aim is to develop sustainable farming, improve traceability within supply chains
--World Bank says satisfied with Armajaro's "clear separation of governance" from other business activities
NEW YORK/LONDON -- The World Bank plans to invest in U.K. commodities dealer Armajaro Trading Ltd., founded by Anthony Ward, whose hedge fund cornered the cocoa market two years ago and drove prices to 33-year highs.
The move teams the World Bank's investment arm, the International Finance Corporation with a commodities firm that was once responsible for driving up cocoa prices, with a stated aim of developing sustainable farming and improving traceability within its supply chains. That could burnish Armajaro's reputation in the industry and help it grow.
Ward's Armajaro hedge fund two years ago took the largest delivery from exchange stocks in 14 years, causing prices on London's Liffe exchange to soar to GBP2,709 a metric ton ($4,275/ton).
When asked whether the move was a concern, a spokesperson for the International Finance Corporation said: "IFC is satisfied with the results of its due diligence on Armajaro Trading.
"We are confident that there is a clear separation of governance from the other business activities of its shareholders," said the spokesperson in an e-mailed statement, referring to the hedge fund.
Food-price inflation has persisted as a concern especially in emerging markets, where food costs tend to represent a greater portion of workers' smaller incomes. Food prices set record highs several times early last year amid global supply concerns for cereals, sugar and cocoa. Rising food prices also were cited as one of the catalysts for unrest in North Africa, which led to the downfall of leaders in Tunisia, Egypt and Libya.
IFC, the World Bank's investment arm, is lending $55 million to Armajaro and has an option to receive a 6% stake in one of the world's largest traders of soft commodities, Armajaro said.
"We are delighted to receive this endorsement from a high quality investor such as IFC, which will help us in our goal to become the partner of choice in the agri-commodity supply chain," said Armajaro Trading's Chief Executive Richard Ryan.
IFC sees the move as a way to tap into Armajaro's expansive access to farmers.
Sujoy Bose, chief investment officer and head of the IFC ALAC Fund, said: "Armajaro Trading's extensive sourcing network, deep customer relationships with global buyers, strong expertise in the commodities it trades and its focus on traceable and sustainable products has put the company in a unique position in the fast-growing agri-commodities market."
The World Bank has already invested in other agricultural trading houses, taking stakes in Olam International Ltd. of Singapore and the Switerzland-headquartered Ecom Agroindustrial Corp.
Armajaro has operations in cocoa, coffee and sugar producing countries, such as Brazil, Colombia, Ecuador and Ghana.
-By Neena Rai, Dow Jones Newswires; 4420-7842-9450; [email protected]
--Leslie Josephs in New York contributed to this article.