Petra Foods' sweet deal hits sour note

PETRA Foods' sweet deal to sell its cocoa ingredients business to Barry Callebaut for US$950 million - subject to adjustments at completion - appears to have hit a more sour note as the consumer confectionary group is now being asked by the buyer to assume a closing price reduction to the tune of US$98.3 million. When Petra announced in July that the sale was completed on June 30, the estimated sale proceeds was already cut to US$860 million because working capital delivered at completion was lower by about US$74 million.

Should Petra be compelled to accept the closing price reduction, it would mean a chunky 20 per cent slice off the original offer price when the deal was struck in December last year. The sale emerged from several unsolicited offers to Petra Foods, and Barry Callebaut's offer was said to have been the most attractive.

The price reduction now being sought could also mean that Petra's last announced initial net proceeds of US$164 million from the last agreed price of US$860 million and the net estimated gain on divestment of US$64 million could be whittled down to just US$66 million in net proceeds and a significant estimated net loss on divestment of US$34.3 million on our estimate.