Salim Group shifts Indofood to S'pore

Salim Group shifts Indofood to S'pore

SINGAPORE (Reuter): Indonesia's Salim Group unveiled plans yesterday to inject its flagship PT Indofood Sukses Makmur into Singapore's QAF Ltd in one of the largest takeovers in Singapore corporate history.

Bread maker QAF, 70 percent controlled by Salim, agreed with Anthony Salim and PT Sumber Sampoerna Nusantara to buy a majority stake in Indofood for about 4.68 trillion rupiah (S$2.75 billion) in cash.

QAF, which has a market capitalisation of only S$568 million, plans to finance the acquisition through a massive rights issue raising S$2 billion to S$2.2 billion and the balance through bank borrowings.

Analysts said they were surprised by the size of the asset injection by the Salim Group into QAF and some were also worried about the cost of the acquisition.

"There were market rumors about an asset injection but we didn't expect it to be so sizable," said Cheong Kok Wing, investment analyst with Merrill Lynch.

On completion of the deal, QAF will have an effective interest equivalent to about 50.1 percent of Indofood, which is Indonesia's largest listed food company with a market capitalisation of about S$6 billion.

"The size of the deal is huge and complex...We are quite sure the acquisition makes good sense for QAF," Tan Kong King, group managing director of QAF told a news conference called to announce the deal.

Indofood is the world's largest maker of instant noodles and has interests ranging from flour milling to edible oils. Net sales rose 35 percent to S$1.7 billion and net profit rose 15 percent to S$206 million in 1996.

Tan, who also sits on the board of a number of privately held Singapore companies owned by the Salim Group, said QAF would not just be a holding company for Indofood.

"QAF will not just be the shadow of Indofood although initially its income will be substantially the same as Indofood," he said.

"Our intention is to grow QAF into a truly multinational company," he added.

He said the Salim Group had indicated it would give QAF an option to participate in its food businesses, comprising several noodle plants and flour mills in China.

The Salim Group has also brought Indonesian tobacco tycoon Sampoerna into the QAF deal.

Tan said Salim's stake in QAF would be reduced to 66 percent as it plans to sell 10 percent of the company to the Sampoerna family. He said the price of the stake has not been determined.

In addition, QAF will enter into a joint venture with Sampoerna International Ltd, owned by PT HM Sampoerna, to acquire suitable food businesses in the region. However, Tan ruled out any tobacco businesses for QAF.

On concerns about the financial impact on QAF after the acquisition, Tan said: "The cash flow of QAF plus the dividend from Indofood will be more than enough to service interest and dividend of QAF."