Investors hail First Pacific plan to buy Indofood stake<\/p>\n
HONG KONG (Dow Jones): Investors reacted positively on
\nWednesday to First Pacific Ltd.'s plan to buy a 40 percent stake
\nin PT Indofood Sukses Makmur of Indonesia for US$650 million from
\nthe Salim Group (P.SLM), its parent company.<\/p>\n
The company's shares rose 3 percent, or 20 cents, to HK$6.85
\nin the morning trade.<\/p>\n
The Hong Kong-based conglomerate announced Tuesday it will
\ntake a 40 percent stake in Indonesia's biggest noodle-maker and
\nwill launch a share placement to help finance the deal.<\/p>\n
Analysts said the deal is quite attractive for First Pacific,
\nwhich is acquiring a reputation as a strong recovery play at a
\ngood price.<\/p>\n
\"The deal is sweet indeed,\" said Mark Simpson, head of
\nresearch at Nomura International Ltd., who said he upgraded the
\nstock to a \"buy\" from a \"hold\" after the Indofood acquisition was
\nannounced.<\/p>\n
\"The deal itself is attractive\" Simpson said, and it also
\noffers investors \"quite a good play on the Southeast Asian
\nrecovery through a liquid Hong Kong stock.\"<\/p>\n
The Hong Kong company made a bid for 30 percent of Indofood in
\nDecember with Nissin Food Products Co. of Japan, which was also
\nto acquire 30 percent of the Indonesian company. But that deal
\nfell through in April, prompting First Pacific to make the bid
\nalone in a move that will effectively give it control of
\nIndofood, producer of about eight billion packs of noodles a
\nyear.<\/p>\n
First Pacific plans to buy the 40 percent stake in two
\ntransactions. First, it will buy 549 million Indofood shares, or
\n30 percent of the company, for US$379 million, which works out to
\n5,000 rupiah a share. While the overall price is higher than the
\nUS$285 million offered in December because of a rise in First
\nPacific's stock price, the terms are identical to those of the
\nfailed bid: First Pacific will pay $150 million in cash and
\nfinance the rest by issuing 261 million new First Pacific shares
\nto the Salim family at HK$6.79 each.<\/p>\n
In the second transaction, First Pacific will buy the
\nremaining 10 percent, or 183 million shares, for US$271 million
\nin cash. That values the Indofood shares in the second block at
\n10,730 rupiah each. First Pacific said it is willing to pay more
\nfor the additional 10 percent, because it acquires control with
\nthis tranche.<\/p>\n
First Pacific will place 254 million new shares valued at
\nUS$200 million with institutional investors and issue a US$50
\nmillion seven-year convertible bond to help finance the cash
\nportion of the plan. The shares were placed at HK$6.23 each in a
\ndeal handled by ING Barings Securities (HK) Ltd.<\/p>\n
While most analysts said the price paid for the Indofood stake
\nwas attractive, there is some concern that the share price
\nalready reflects the acquisition with little upside left for the
\nshare.<\/p>\n
Anil Daswani, head of research at Salomon Smith Barney, said
\nhe doesn't \"see much upside\" for First Pacific as the
\n\"acquisition is already priced into the share price.\"<\/p>\n
After a flurry of asset sales and acquisitions in Asia,
\nDaswani said, First Pacific has essentially become a three-
\ncompany firm with the Philippines Long-Distance Telephone Co.,
\nFort Bonifacio, a massive development project in the Philippines
\nwhich it controls through its Philippines flagship Metro Pacific
\nand Indofood, its primary assets.<\/p>\n
He estimates the company's net asset value at around HK$7.00
\nand said First Pacific doesn't deserve to be traded at a premium
\nto its net asset value.<\/p>",
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"sponsor": "Okusi Associates",
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