Investors hail First Pacific plan to buy Indofood stake

Investors hail First Pacific plan to buy Indofood stake

HONG KONG (Dow Jones): Investors reacted positively on
Wednesday to First Pacific Ltd.'s plan to buy a 40 percent stake
in PT Indofood Sukses Makmur of Indonesia for US$650 million from
the Salim Group (P.SLM), its parent company.

The company's shares rose 3 percent, or 20 cents, to HK$6.85
in the morning trade.

The Hong Kong-based conglomerate announced Tuesday it will
take a 40 percent stake in Indonesia's biggest noodle-maker and
will launch a share placement to help finance the deal.

Analysts said the deal is quite attractive for First Pacific,
which is acquiring a reputation as a strong recovery play at a
good price.

"The deal is sweet indeed," said Mark Simpson, head of
research at Nomura International Ltd., who said he upgraded the
stock to a "buy" from a "hold" after the Indofood acquisition was
announced.

"The deal itself is attractive" Simpson said, and it also
offers investors "quite a good play on the Southeast Asian
recovery through a liquid Hong Kong stock."

The Hong Kong company made a bid for 30 percent of Indofood in
December with Nissin Food Products Co. of Japan, which was also
to acquire 30 percent of the Indonesian company. But that deal
fell through in April, prompting First Pacific to make the bid
alone in a move that will effectively give it control of
Indofood, producer of about eight billion packs of noodles a
year.

First Pacific plans to buy the 40 percent stake in two
transactions. First, it will buy 549 million Indofood shares, or
30 percent of the company, for US$379 million, which works out to
5,000 rupiah a share. While the overall price is higher than the
US$285 million offered in December because of a rise in First
Pacific's stock price, the terms are identical to those of the
failed bid: First Pacific will pay $150 million in cash and
finance the rest by issuing 261 million new First Pacific shares
to the Salim family at HK$6.79 each.

In the second transaction, First Pacific will buy the
remaining 10 percent, or 183 million shares, for US$271 million
in cash. That values the Indofood shares in the second block at
10,730 rupiah each. First Pacific said it is willing to pay more
for the additional 10 percent, because it acquires control with
this tranche.

First Pacific will place 254 million new shares valued at
US$200 million with institutional investors and issue a US$50
million seven-year convertible bond to help finance the cash
portion of the plan. The shares were placed at HK$6.23 each in a
deal handled by ING Barings Securities (HK) Ltd.

While most analysts said the price paid for the Indofood stake
was attractive, there is some concern that the share price
already reflects the acquisition with little upside left for the
share.

Anil Daswani, head of research at Salomon Smith Barney, said
he doesn't "see much upside" for First Pacific as the
"acquisition is already priced into the share price."

After a flurry of asset sales and acquisitions in Asia,
Daswani said, First Pacific has essentially become a three-
company firm with the Philippines Long-Distance Telephone Co.,
Fort Bonifacio, a massive development project in the Philippines
which it controls through its Philippines flagship Metro Pacific
and Indofood, its primary assets.

He estimates the company's net asset value at around HK$7.00
and said First Pacific doesn't deserve to be traded at a premium
to its net asset value.