Indofood cancels Golden Agri deal, mulls replacement

JAKARTA (JP): Publicly listed giant food producer PT Indofood Sukses Makmur said on Saturday it had canceled the acquisition of the Sinar Mas Group-owned oil palm firm PT Golden Agri Resources, intensifying speculation that Indofood may acquire PT Astra Agro Lestari instead.

Indofood president Eva Riyanti Hutapea said Golden Agri had failed to fully meet certain conditions of the acquisition deal by its Aug. 10 deadline.

She did not rule out the possibility of seeking a replacement for the failed acquisition of Golden Agri.

"The decision to discontinue the planned acquisition of GAR (Golden Agri Resources) does not change Indofood's intention to continue to explore investment or management participation when the right opportunities arise," Eva said.

In May, Indofood and Golden Agri signed a preliminary deal to acquire the latter's stake of up to 55 percent for around $173 million.

The Singapore-listed Golden Agri is a unit of the Sinar Mas Group's Asia Food Property (AFP).

Some had questioned the feasibility of the deal given Golden Agri's huge foreign debts of some $400 million.

There were also concerns over the company's link to the Sinar Mas Group, whose unit Asia Pulp & Paper (APP) defaulted on debts of over $12 billion.

Eva did not elaborate on the reasons Golden Agri failed to meet the agreement conditions on time.

But she said earlier that missing data was stalling a due diligence on Golden Agri, without which the deal would be void.

Even while Indofood was awaiting Golden Agri's due diligence, talks surfaced that the company was looking to replace Golden Agri.

The strongest candidate is publicly listed Agro Lestari, a subsidiary of the widely diversified PT Astra International.

Astra officials have said the company was in informal talks with Indofood regarding Agro Lestari's acquisition.

Thus far, Indofood remains silent over the rumors, saying only that it would look into Agro Lestari should Astra make an offer.

Divesting its palm plantation unit would help Astra pay off its massive foreign debts.

And Indofood has been long trying to boost revenue from its agribusiness division, which Eva said "provides significant profit contribution to the company".

Both companies tried to play down the other side's importance for meeting their goals -- a further indication that they were serious.

Astra revealed that more than one buyer had showed interest in Agro Lestari, while Indofood said it was looking at several other palm plantation firms.

Elsewhere, Indofood said its first half net profit rose to Rp 352.7 billion (about $38.75 million), or up 23 percent from last year's first half net profit.

The company attributed the increase to lower foreign exchange losses, with foreign debts as of June 30, 2001 dropping to $448 million from $680 million in the same period last year.

First half net sales rose by 23 percent to hit Rp 7.15 trillion on a combination of higher prices and sales volume.

But an increase in expenses, among others from higher fuel and power prices, as well as a weaker rupiah, weakened Indofood's gross margin to 26 percent against 31 percent the year before.(bkm)