Wilmar’s acquisition of rest of Goodman Fielder a positive, analysts say

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Wilmar’s move to take full ownership of Australian regional food company Goodman Fielder “will bode well” for the Singapore company, DBS said in a note on Tuesday.

“WIL has embarked on a long term strategy of building a consumer products portfolio which provides a more steady recurring income,” DBS said.

On Monday, Wilmar said it plans to acquire the 50 percent it doesn’t already own of FPW Singapore, which owns Goodman Fielder, for US$180 million (S$244.63 million) in cash from Oceanica Developments.

DBS said Wilmar can use its existing distribution networks to improve export sales of Goodman Fielder’s products, which include the Praise, Olive Grove and Pilot brands, and build its Asian presence.

“In the long term, we expect WIL to extend the penetration of its well-established brands via its vast distribution networks in Asia’s growing markets, which will provide upside potential for earnings.”

But CGS-CIMB was more circumspect on the deal, saying it’s a long-term positive, but that isn’t likely to impact near-term earnings

“We are positive on the investment in the longer term as it will help Wilmar expand its consumer products division,” CGS-CIMB said in a note on Monday, but it noted the deal will raise Wilmar’s net gearing as it consolidates FPW’s debts.

The brokerage added that the price of the deal was 28-49 percent lower than Wilmar’s investment value of the 50 percent FPW stake it already owned.

“We gather that this could be due to the more challenging operating environment GF faces in Australia,” the note said.

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