Salim's QAF deal puzzling: Analysts

Salim's QAF deal puzzling: Analysts

SINGAPORE (Reuter): Analysts and brokers said they were puzzled by the share option taken by the Salim group of Indonesia that would oblige it to make a takeover offer for Singapore-based food group QAF Ltd -- a company it already manages.

Salim's privately-held KMP Pte Ltd said in a weekend statement it had agreed with the Swiss Bank Corporation (SBC) on options to buy 25 million QAF shares at Singapore $1.93 each and 2.5 million QAF warrants at S$1.02 each.

The options may be exercised up to July 15.

KMP already owns 24.77 percent of QAF, just shy of the 25 percent takeover trigger point under Singapore takeover laws. It also owns 8.95 million QAF warrants.

Exercising the option would take KMP's stake in QAF to 103.3 million shares, or 32.68 percent, and require it to make a general takeover offer for all outstanding QAF shares at S$2.00 a share and $$1.10 for all outstanding warrants.

"There is no good reason for Salim to go into this deal. It already is the largest shareholder of the company and also has management control," said the managing director of a local brokerage.

KMP managing director Tan Kong King is also on the QAF board.

"If Salim wanted to mount a takeover for QAF, why didn't he just buy the shares outright instead of going for this option deal?" said another analyst.

Gregory Yap, investment analyst with J.M. Sassoon, said the deal was "devoid of facts and puzzling" given that KMP has not shed any light on its move.

"There are two possibilities. One its that the Salim group wants to fend off any possible hostile takeovers from a third party. The other is that Salim wants to maintain total control just in case he has big plans for the company," he said.

Yap also said the takeover price of S$2 a share was expensive, pricing QAF at 34 times its 1996 earnings.

"Fundamentally, there is very little upside for the company," he said.

KMP officials declined to add to what the company said in its weekend statement.