Indofood CBP pushes $3 Billion into FMCG amid COVID19

Indofood CBP pushes $3 Billion into FMCG amid COVID19
  • Indofood CBP will pay US$1.53 billion to Pinehill Corpora for its 51% stake and US$1.47 billion to Steele Lake for its 49% stake
  • Pinehill Co. and Steele Lake are guaranteeing $128.5 million in consolidated group net income through December 2021
  • Pinehill Group manufactures and sells instant noodles, with its key markets being Saudi Arabia, Nigeria, Egypt, Turkey, Serbia, Ghana, Morocco and Kenya.
  • Indofood CBP has annual production capacity of 19 billion packs of instant noodles, according to its 2019 annual report.
  • Indofood Sukses Makmur reported a $94 million net income in this year's first quartergiving the company solid footing to survive the coronavirus crisis for the rest of the year. 

 

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In the midst of global uncertainties, ICBP remained resilient and recorded top and bottom line growth in the first quarter of 2020. We will continue to monitor and adapt to the evolving situations, whilst managing our business prudently and staying competitive in the industry. - Anthoni Salim, the President Director and Chief Executive Officer of ICBP

PT Indofood CBP Sukses Makmur, owned by Indonesian billionaire Anthoni Salim, is paying $3 billion for a 100% stake in instant noodles Africa and the Middle to expand in fast-growing markets for consumer products.

This adds to a conglomerate of companies acquired by the Head of the powerful Salim Group who also has a stake in Philippine Long Distance Telephone, which paid $1.6 billion for a 52% stake in rival in October last year.

Indofood CBP will hold a shareholders’ meeting on July 15 for the proposed transaction

Indofood CBP, part of conglomerate Indofood Sukses Makmur, will acquire 100% of Pinehill Co. from Pinehill Corpora Ltd., an affiliated party of Indofood CBP, and Steele Lake Ltd., it said Monday.

Pinehill Group manufactures and sells instant noodles, with its key markets being Saudi Arabia, Nigeria, Egypt, Turkey, Serbia, Ghana, Morocco, and Kenya. It has 12 factories with a production capacity of approximately 10 billion packs, Indofood CBP said.

How will the transaction be funded

The acquisition will be funded through a mix of internal resources of $300 million and third-party bank borrowings

Indofood CBP will pay $1.53 billion to Pinehill Corpora for its 51% stake and $1.47 billion to Steele Lake for its 49% stake, the company said.

The acquisition value may be adjusted if the sellers fail to meet the profit guarantee ($128.5 million ) within a 5% deviation, Indofood CBP said.

What are the metrics?

Indofood has seen a change in consumer buying in Asia. Customers are conscious of their health and are drawn towards halal products which are the primary choice.

Indofood, which dominates the instant noodles market in Southeast Asia’s largest economy, expects to gain a strategic position in Pinehill’s markets.

The FMCG industry continues to make gains  post-pandemic

Indofood CBP Sukses Makmur advanced as much as 2.6% in Jakarta trading, shares of parent Indofood Sukses Makmur rose as much as 1.2%.

Mimi Halimin, an equity analyst at Mirae Asset Sekuritas, said he expected Indofood to continue growing amid an economy crippled by Covid-19 this year.

"We expect Indofood CBP to contribute 76 percent of Indofood's total financial performance this year," Mimi said, referring to the company's noodle, snacks and beverage maker subsidiary. 

Growing sales of Indofood's premium instant noodle varieties contributed greatly to the growth of the company's financial performance. 

Premium instant noodles offer a greater profit margin compared to the regular varieties.