More certainty for sale of majority stake in China Minzhong Food

CHINA Minzhong Holdings and PT Indofood Sukses Makmur have committed to continue to discuss and work towards the finalisation of the proposed acquisition by China Minzhong Holdings of a majority stake in China Minzhong Food Corporation.

Both on Wednesday signed a binding memorandum of understanding (MOU) to discuss "in good faith" the proposed acquisition, with a view to reaching a definitive sale and purchase agreement within 12 months. This marks a turnaround from the uncertainty earlier in July, when China Minzhong Food Corporation said that both parties in the deal had not yet reached a definitive agreement and there is no assurance that this will be done, or that the offer will materialise.

China Minzhong Food Corporation in December last year said that China Minzhong Holdings could acquire 347 million of its shares - representing about a 52.94 per cent stake - from PT Indofood at S$1.20 per share.

Under the terms of the MOU, this proposed acquisition will also be subject to, among others, the finalisation of funding arrangement on terms satisfactory to China Minzhong Holdings, an investment holding firm linked to the CEO of China Minzhong Food Corporation, Lin Guo Rong.

China Minzhong Holdings has also agreed to pay PT Indofood up to S$40 million in consideration of PT Indofood entering into the MOU. This will be treated as part of the consideration payable to PT Indofood upon completion of the transaction.

But if China Minzhong Holdings fails to pay this sum on the due date, or the parties fail to sign the sale and purchase agreement by the expiry date, the MOU will be terminated and China Minzhong will have to forfeit the amount that it has paid to PT Indofood.

China Minzhong Food ended trading four Singapore cents higher at 72 Singapore cents on Wednesday, before the announcement was made.