Financial Adviser: Indofood Agri takeover bid ‘not fair but reasonable’

Palm kernels at a plantation in IndonesiaPalm kernels at a plantation in Indonesia

Indofood Sukses Makmur’s S$0.3275 a share takeover bid for Indofood Agri Resources is “not fair but reasonable,” Novus Corporate Finance, the independent financial adviser for recommending directors, has said.

It recommended directors advise shareholders to accept the offer, unless they can obtain a higher price in the open market after considering brokerage costs.

“We would advise the recommending directors to consider highlighting to the shareholders that there is no assurance that the market prices of the shares after the close of the offer may be maintained at current levels,” Novus said.

Earlier this month, the takeover bid was raised to S$0.3275 a share from S$0.28. On Friday, the stock closed at S$0.33, up 1.54 percent.

‘Not fair’

Novus said that it determined the offer was “not fair” because the offer price was a “significant discount” of 59.0 percent to the unaudited net asset value per share of S$0.798 at end-March.

In addition, the enterprise value per hectare of the company, based on the offer price, was “significantly below” the mean and median levels of comparable companies, Novus said, according to a filing to SGX Friday.

‘But reasonable’

However, Novus said the offer was “reasonable,” in part because Indofood Agri’s gross profit and gross profit margin have been declining since 2016, with the company posting net losses in fiscal 2018 and the first quarter of 2019.

Indofood Agri’s operating performance, including gross profit margin and crude palm oil yields, have been lower than comparable companies, Novus said.

The offer is a “significant premium” over the volume weighted average price of Indofood Agri’s shares for the one-year, six-month, three-month and one-month periods before offer was made in April, Novus said.

The bid also comes in above analysts’ target prices on the stock, which ranged from S$0.19 to S$0.26, Novus said.

The adviser noted there is no alternative takeover offer, and “the likelihood of a competing offer is remote,” as Indofood Sukses Makmur already controls around 82.35 percent of Indofood Agri Resources.

Novus added that Indofood Sukses Makmur already has statutory control over Indofood Agri Resources and it can already significantly influence the company’s operations.


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