Indofood will acquire Bogasari from Indocement

Indofood will acquire Bogasari from Indocement

JAKARTA (JP): The well-diversified Salim Group plans an internal acquisition through the transferal of PT Bogasari Flour Mill's assets from PT Indocement Tunggal Prakarsa to its food division, PT Indofood Sukses Makmur.

Directors of Indocement and Indofood told a joint press conference here yesterday that the acquisition plan is still subject to the approval of the government and the minority shareholders.

Indofood is 50.1 percent owned by Indocement. Both companies, which are controlled by the Salim Group, are listed on the Jakarta and Surabaya Stock Exchanges. Public shares account for 2.1 percent in Indofood and 10 percent in Indocement.

When asked, the directors refused to state the value of the planned acquisition, saying that could be announced after it is approved by the authorities and minority shareholders.

"An independent appraiser is still accessing the value of Bogasari's assets and liabilities. What I can assure is that the price settled on will be deemed fair by both parties," said Eva Riyanti Hutapea of Indofood.

Indocement acquired Bogasari in 1992 at US$414.6 million.

Eva noted that Indofood will explore fund-raising measures, including debt accruing and equity improvement, to finance the acquisition. "We consider issuing right shares as one possibility to raise funds," she added.

Monopoly

She said the planned acquisition of Bogasari, which practically holds a monopoly in wheat milling domestically, will enhance Indofood's standing as the largest integrated food manufacturer in the country.

Indofood, which owns and operates 22 food processing plants in various provinces, claims to hold a 90 percent market share for instant noodles in Indonesia, about 60 percent for both snack and baby foods and another 50 percent for coffee and other products.

The company recorded a 190 percent increase in its after-tax profit to Rp 145.6 billion during the January-September period of last year over the corresponding period of 1993.

Eva disclosed that the company's unaudited after-tax profit for last year soared to Rp 220 billion. "For this year, we initially expect to get some Rp 300 billion in after-tax profit, but because of the acquisition," she added.

Sudwikatmono of Indocement specified that Bogasari's milling plants in Jakarta and Surabaya, East Java, have a combined production capacity of 2.5 million tons of flour per annum. Its capacity is projected to increase by 40 percent by the year 2000.

Bogasari also controls the management of a flour milling plant owned by PT Berdikari Sari Flour Mill in Ujungpandang, South Sulawesi, with an annual production capacity of 800,000 tons.

Sudwikatmono denied allegations that Bogasari monopolizes flour milling in the country, saying that since 1993 the government has allowed other private companies to set up flour milling plants.

The government has approved the construction of three new flour milling plants in Medan, North Sumatra; Semarang, Central Java, and Cibinong, West Java. "However, I never heard whether they have started the construction of their projects," Sudwikatmono said.

Bogasari gets wheat from the National Logistics Agency, which monopolizes the importation and distribution of wheat and other agricultural products. Bogasari pays the agency after its products are marketed.

Sudwikatmono said Bogasari currently owes Rp 94 billion ($42.7 million) to the logistics agency in the form of wheat stocks.

He noted that the sale of Bogasari's assets will give Indocement fresh money for paying its debts and for financing its planned expansion program and the major modification of its cement plants.

"The sale of Bogasari to Indofood will allow Indocement to have a business structure that is more focused on its core business -- cement manufacturing," Sudwikatmono said.

Indocement, the country's largest cement producer, plans to increase its annual production capacity from 9.4 million tons at present, almost 50 percent of the country's total output, to 14.5 million tons by the end of 1997.

Sudwikatmono predicted that the annual cement crises will occur until 1997, when the expansion projects of a number of leading cement factories are expected to reach completion.

Benny S. Santoso, the executive director of Indocement, noted that its unaudited after-tax profit reached Rp 360 billion last year, of which Rp 95 billion was contributed by Bogasari. Indocement's 1993 profit was recorded at Rp 312.4 billion. (rid)