Indofood to cuts purchase price
Indofood to cuts purchase price
JAKARTA (JP): The Salim Group's publicly listed Indofood
Sukses Makmur has cut the price of buying its sister companies
from Rp 1.7 trillion to Rp 1.5 trillion (US$633 million).
The company's chief executive officer, Eva Riyanti Hutapea,
said yesterday the Rp 200 billion reduction was because the cost
of its oil palm plantation purchase had been cut.
She said the price for oil palm plantations was reduced from
Rp 1.25 trillion to Rp 1.05 trillion.
"Overall the new acquisition price is at an average of 8.9
times 1997 prospective earnings," she said.
Hutapea said she was optimistic prospective earnings per share
for 1997 on a fully diluted basis would be much higher than the
initial target.
The company's internal acquisition plan drew a lukewarm
reaction from investors.
Its share price dropped last week because investors were
concerned about the cost of the acquisition plan and the impact
of a proposed rights issue to buy its sister companies.
Hutapea said the plan to buy the group's edible oil and fat
plantations and distributors was aimed at strengthening its
branded consumer packaged foods business.
Indofood, which is listed on the Jakarta Stock Exchange,
expects over Rp 5 trillion ($2.07 billion) in net sales from the
acquisition.
She estimated net profit would increase by over 45 percent and
earnings per share by close to 20 percent this year because the
cost of Indofood's integrated operations would be greatly
reduced.
To finance the acquisition, a five-for-one share issue would
be used instead of a four-for-one issue as originally planned,
she said.
She said the new shares would be issued at Rp 3,300 each.
The proposed acquisition would improve the efficiency and the
productivity of he group's plantations, she said.
She said without the plantations, Indofood would face
difficulties finding quality CPO source of sufficient volume and
price needed in the long term.
"With increasing demand for vegetable cooking and a commodity
market share position of over 55 percent for branded cooking oil,
the supply of CPO is critical," she said.
The cyclical production of CPO in Indonesia caused the
government to semibuffer its price during low harvest seasons to
prevent a shortage and price escalation, she said.
She said the existing tax on CPO, which could be lifted at any
time, also affected the commodity's availability in the domestic
market. (hen)