Japfa jumps 10.8% on plans to distribute shares, list dairy unit

Agri-food firm Japfa has applied to list its dairy unit in Hong Kong, AustAsia Investment Holdings, on the mainboard of Hong Kong's stock exchange.

As part of the listing plan, Japfa wants to distribute all its shares in AustAsia to its existing shareholders, the company announced on Tuesday. It is proposing a distribution-in-specie of its entire shareholding in AustAsia, which will see eligible shareholders receive AustAsia shares in proportion to their respective shareholdings in Japfa.

No cash outlay is required from Japfa shareholders under the proposed distribution, which will be effective on the day AustAsia shares are listed in Hong Kong. Japfa shares jumped on the news, with the counter up seven cents, or 10.8 per cent, to 72 cents yesterday.

Japfa said the listing will unlock value for shareholders, by creating two separate businesses and providing each entity's management with operational flexibility and the ability to concentrate on their respective core business. The company will also be able to better focus its financial resources on its animal protein business without needing to plan for AustAsia's funding requirements.

The proposed distribution is expected to provide Japfa shareholders with greater clarity on the respective value and business of its animal protein segment and AustAsia.

It also provides flexibility to Japfa's shareholders to deal with their stake in AustAsia independently of Japfa, while having the option to participate in the growth of both entities, the company said.

Japfa chief executive and executive director Tan Yong Nang noted that the separation of the two entities is a "watershed moment" for the group, adding that the animal protein segment has emerged stronger from the Covid-19 down-cycle.

If the proposed distribution takes place, Japfa will cease to hold any AustAsia shares, and the latter will cease to be a subsidiary of the company.

The capital reduction exercise will reduce Japfa's issued and paid-up capital by US$555 million (S$752 million), based on its cost of investment in AustAsia, although there will not be any reduction or cancellation in the number of issued shares.

Japfa noted that following the proposed distribution, its animal protein segment will remain a significant business, with pro forma revenue of over US$4 billion and pro forma earnings before interest, tax, depreciation and amortisation (Ebitda) of US$374 million last year. The animal protein segment accounted for 88 per cent of the group's revenue and 70 per cent of its Ebitda last year.

As for its management team, Japfa said AustAsia had always maintained an independent management team, hence there will be no changes in the business, continuity of management and operational control of the animal protein segment.

Japfa will be seeking shareholders' approval for the proposed distribution at an extraordinary general meeting.

THE BUSINESS TIMES