Tycoon Salim's entity eyes China Minzhong

A worker inspectingmushroom cultivation at China Minzhong Food. The firm will be delisted if the buyout offer goes through.
A worker inspectingmushroom cultivation at China Minzhong Food. The firm will be delisted if the buyout offer goes through. PHOTO: CHINA MINZHONG FOOD CORPORATION

Firm's largest shareholder Indofood could use proceeds from the sale to repay some of its foreign currency debt

JAKARTA • A company controlled by billionaire Anthoni Salim offered to acquire the rest of China Minzhong Food in a deal valuing the Chinese company at S$786 million, helping the Indonesian tycoon exercise greater control over a food empire spanning potato chips, instant noodles and cooking oil.

Marvellous Glory Holdings offered S$1.20 in cash for each share in China Minzhong, according to a filing yesterday in Singapore, where China Minzhong is listed. That's 25 per cent more than the stock's last closing price.

Investors can choose an alternative in the form of cash and exchangeable bonds under terms in the offer. Shares of the Chinese vegetable-processing company jumped 18 per cent to close at S$1.135.

The deal makes sense for China Minzhong's largest shareholder, Mr Salim's Indofood Sukses Makmur, according to Mr Syaiful Adrian, an analyst at Ciptadana Sekuritas.

A buyout would allow China Minzhong, which reported a third decline in annual profit for the year ended June 30, to be removed from Indofood's books.

  • Indonesia may cut tax on bond income

  • JAKARTA • Indonesia's government is considering lowering a tax on income generated by all its bonds as it seeks to reduce local borrowing costs, a Finance Ministry official said yesterday.

    The plan may take effect as early as next year and will cover debt denominated in rupiah and foreign currencies, according to Mr Scenaider Siahaan, director of strategy and portfolio at the ministry's budget financing and risk management office.

    This follows a move in June to effectively scrap a withholding tax on interest payments on its global bonds by absorbing the levy.

    Indonesian yields are the highest among major South- east Asian issuers.

    "The review has been discussed with related units at the ministry and we're preparing to submit it immediately to the Finance Minister," Mr Siahaan said.

    The official had said in May that lowering taxes on bonds would help local companies reduce borrowing costs.

    The moves are in line with President Joko Widodo's repeated calls for interest rates to "fall, fall, fall, fall and keep falling" to help boost economic growth.

    Finance Minister Sri Mulyani Indrawati will review the proposal to cut the tax, currently set at 15 per cent for local investors and 20 per cent for foreigners, and the government would need to get parliamentary approval to lower the rate to zero, or scrap it entirely, according to Mr Siahaan.

    Indonesia's 10-year government notes yield 6.88 per cent, compared with 3.52 per cent for Malaysian bonds and 2.22 per cent on Thailand's debt, according to data.

    BLOOMBERG

"China Minzhong Food has been weighing on Indofood," Mr Adrian said. "Indofood could also use the proceeds from the sale to repay some of its foreign-currency debts and reduce the exchange-rate risk on the company."

Indofood had total foreign-currency debt of about US$1.1 billion (S$1.5 billion) as of June, or about half of its 28.6 trillion rupiah (S$3 billion) in liabilities, according to the company's financial report.

China Minzhong will be delisted if the offer goes through, according to the document.

Mr Salim has a net worth of US$3.3 billion, according to the Bloomberg Billionaires Index. His First Pacific, through Jakarta-listed Indofood, owns 82.88 per cent of China Minzhong.

The offer requires preconditions to be met, including approval from shareholders of Indofood and First Pacific for the Jakarta-based company to sell its stake in China Minzhong. Mr Salim will be required to abstain from voting on the resolution, according to the document. The offer is also contingent on the acquirer gaining acceptances for shares carrying more than 50 per cent of voting rights, the document showed.

China Minzhong said the proposal would allow "greater control and management flexibility" in implementing "strategic initiatives," according to the filing.

A takeout of China Minzhong would add to more than a dozen delistings announced in Singapore with a combined market value of S$4.5 billion in the first half of 2016 alone, according to data compiled by Bloomberg.

"Valuations have been beaten down so there is a lot of incentive to take them private," said Mr Jeremy Teong, an analyst at Phillip Securities.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on September 08, 2016, with the headline 'Tycoon Salim's entity eyes China Minzhong'. Print Edition | Subscribe