Indonesia’s Indofood to seek shareholder nod for $2.99 bln acquisition of instant noodle affiliate
JAKARTA - PT Indofood CBP Sukses Makmur Tbk’s (ICBP) plans to acquire Pinehill Group is in the final stage and now only requires shareholder approval, the company said in a disclosure on the Indonesian stock exchange on Monday (June 8).
Pinehill manufactures Indomie instant noodles, under a licensing agreement with ICBP parent company Indofood, and has a strong market presence in Egypt, Ghana, Kenya, Morocco, Nigeria, Saudi Arabia, Serbia, and Turkey.
ICBP’s extraordinary General Meeting of Shareholders (EGMS) will be held on July 15 and the company expects the transaction to be completed by August 28.
The company will spend $2.99 billion, or the equivalent of 41.67 trillion rupiah (exchange rate of $1 / 13,901 rupiah), to purchase the British Virgin Islands-registered company.
ICBP will finance the purchase with internal cash of $300 million or 4.17 trillion rupiah, long-term bank loans of $2.05 billion or 28.49 trillion rupiah with 5-year maturity, as well as other long-term liabilities of $650 million or equivalent to 9.03 trillion rupiah.
These funds will be paid to Pinehill Corpora Limited (PCL) and Steele Lake Limited as owners of the Pinehill Group.
Pinehill Corpora has a 51% stake in Pinehill Group, while the rest is owned by Steele Lake.
Pinehill Corpora and Steele Lake will each receive payments of $1.19 billion and $1.46 billion, respectively.
This acquisition is also assumed to incur additional costs of 512.94 billion rupiah and 26.57 billion rupiah. These costs consist of several components, including the provision fees for long-term bank loans and professional service fees.
The acquisition price is 4.7% higher than the company's valuation. KJPP Rengganis, Hamid, and Partners as the independent consultant, said that the fair market value of PCL based on the adjusted book value method was $2.86 billion or 39.8 trillion rupiah. But it is considered reasonable because it is still below maximum deviation of 7.5% of the fair market value of PCL.
Valuation and advisory firm KJPP Rengganis, Hamid and Partners considers the acquisition will improve ICBP’s market position in eight PCL locations. It is also expected to drive the company's revenue and profit growth up by around 20% per year.
However, the acquisition is also expected to increase ICBP’s debt to equity ratio (DER) and debt to assets ratio (DAR) significantly it is mostly funded by loans.
On the other hand, return on assets (ROA) and return on equity (ROE) will decrease due to a rise in professional service costs and an increase in assets and capital.
PCL has 12 production facilities with a total capacity of 10 billion packs of instant noodles per year. It also has a distribution network in 33 countries with a total population of 885 million.
ICBP's President Director Sukses Makmur Anthoni Salim has an indirect participation of 49% in PCL.
Steele Lake is indirectly owned by ASM Telok Ayer Fund, a discretionary mutual fund managed and controlled by Argyle Street Management Limited, based in Hong Kong.
(Reporting by Yosi Winosa; Editing by Emmy Abdul Alim [email protected])
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