Indofood raises buyout offer price for IndoAgri to 32.75 Singapore cents

Singapore

INSTANT noodle heavyweight Indofood Sukses Makmur has raised its buyout offer price for Mainboard-listed Indofood Agri Resources (IndoAgri) to 32.75 Singapore cents per share, from 27.75 Singapore cents previously, according to a bourse filing by IndoAgri on June 2.

On May 31, CIMB had also announced the offer price revision for the palm oil firm in a Singapore Exchange filing on behalf of the offeror. Indofood does not intend to revise the final offer price.

The new offer price represents a 26 per cent premium to IndoAgri's share price of 26 Singapore cents on April 5, and a 42.1 per cent premium to its VWAP (volume-weighted average price) of 23.04 cents for the month up to April 5.

However, the new offer price still represents a steep 59 per cent discount to IndoAgri's unaudited net asset value (NAV) per share of 79.8 Singapore cents as of March 31. This is slightly narrower than the 65.2 per cent discount to NAV with the previous offer price.

Indofood, which is controlled by Indonesian tycoon Anthoni Salim, and its concert parties owned 82.35 per cent of IndoAgri as of Friday, still shy of the 90 per cent threshold for the offer to turn unconditional. The offer closes on June 25.

The buyout offer for IndoAgri has received valid acceptances from shareholders, excluding concert parties, representing 7.82 per cent of IndoAgri's total shares as of May 31.

Given the latest offer price revision, IndoAgri will send a supplemental letter to shareholders with the advice of independent financial adviser Novus Corporate Finance.

In its previous letter on May 10, Novus advised that the initial offer price of 28 Singapore cents per share (which was later adjusted to 27.75 Singapore cents to account for the FY2018 dividend) was "not fair but reasonable". Novus recommended that shareholders accept the offer.

Reasons that Novus had deemed the original offer "not fair" were that the offer price was at a "significant discount" to IndoAgri's NAV per share, and that the premia of the offer price over the one-month, three-month and six-month VWAP was lower than the mean and median premia of those in precedent privatisations.

Despite the unexciting offer, DBS analysts had also recommended that shareholders accept the 28 Singapore cents per share offer. In an April 11 report, the research house noted that the proposed offer represented a US$4,400 enterprise value (EV) per hectare, "a discount to typical plantations transactions at US$13,000 EV/ha".

The steep disparity is likely due to IndoAgri's "shrinking operating profit margins, unlike its peers which have been able to demonstrate an ability to maintain their margins amidst palm oil price movement", DBS analysts William Simadiputra and Lim Rui Wen noted in the report. They had a "hold" call on the counter with a 19 Singapore cent target price.

Buyout offers like IndoAgri's deemed "not fair but reasonable" by IFAs have attracted controversy, as retail investors complain about being shortchanged.

Current listing rules require exit offers to be "reasonable", but not necessarily "fair". In November last year, the SGX Regco proposed that voluntary delistings should be deemed both reasonable and fair by IFAs for the exit to proceed.

Shares of IndoAgri closed flat at 27.5 Singapore cents on May 31.