Riady family moves to take Auric Pacific private

Singapore

TWO decades after the Riady family of Indonesia's giant conglomerate Lippo Group made their maiden foray into the Singapore bourse with a "friendly" takeover of Sunshine bread maker Auric Pacific Group, they have lobbed a S$48.3 million takeover bid at S$1.65 cash per share to take the food company off the main board.

If the deal goes through, it will join the growing bandwagon of privatisations in the Singapore Exchange, where inexpensive valuations have turned many firms into attractive buyout targets.

Auric Pacific's controlling owner Stephen Riady and his son-in-law Andy Adhiwana launched the voluntary offer on Tuesday through Silver Creek Capital to scoop up the remaining 29.25 million shares (the last 23.28 per cent interest) in the company which they do not already own, at a final offer price of S$1.65 apiece.

Mr Riady and Dr Adhiwana are executive directors in the company; the latter is also the chief executive.

As at Tuesday, Silver Creek Capital did not hold shares in Auric Pacific.

Mr Riady holds, indirectly through Hong Long-listed Lippo China Resources, some 61 million shares or 49.28 per cent of Auric Pacific; Dr Adhiwana holds, indirectly through Goldstream, some 34 million shares or 27.44 per cent in the group.

If the offeror manages to pool 90 per cent of the total number of shares, including the 76.72 per cent that the concerted parties already own, a delisting is on the cards.

The news was enough to mix things up at the counter of the diversified food firm, which also owns the Food Junction food courts and Delifrance cafes, and operates in Singapore, Malaysia and Hong Kong.

All of last week, the stock had not budged from levels of between S$1.450 and S$1.455.

But on Tuesday, when trading in the shares resumed at 11am following the trading halt called ahead of the news, the stock surged 19.5 Singapore cents or 13.4 per cent to finish pat at S$1.65.

The offer may be a sunny exit deal for minority shareholders to bite - from the onset, at least.

Silver Creek, via its financial adviser RHB Securities Singapore, noted that the shares of Auric Pacific have not closed at or above the offer price in nearly 18 years (since Dec1999).

The S$1.65 price is a 13.4 per cent premium over the counter's last-traded price pre-announcement; it is also 17.8 per cent and 23.8 per cent above the volume-weighted average price per share over one month and three months respectively.

Gibson Dunn partner Robson Lee agreed, referring to the premium: "This is a good opportunity for minority shareholders to realise their investments."

He added that, with the manufacturing and retail businesses hit by challenges in an increasingly unpredictable global environment, there will not be a competing offer, considering the interest held by the parties acting in concert with the offeror.

The Riady family, which also controls hotel group and developer OUE, was also busy mounting another cash offer on Tuesday - this one, through the Lippo Group, to raise its stake in Healthway Medical Corp.

It is noteworthy that the takeover price tag for Auric Pacific is quite a long shot from the S$2.42-a-share price that Lippo had coughed up to carve out a majority stake via a general offer for the food firm back in 1997.

CIMB Research, the sole research house covering the company based on Bloomberg data, deemed the offer price "not favourable", partly because it was 15.8 per cent lower to the house's S$1.96 target price for the stock.

It said: "Assuming full acceptance of offer, the aggregate consideration payable for the offer will amount to S$48.3 million; this is even less than company's net cash S$81.3 million as at end-Sept 2016."

But things may be looking up at this point for the group. CIMB Research expects the group to put out a "stellar" showing from FY2017, given that most of its rationalisation and streamlining efforts are done and dusted.

The research house also noted the "substantial" improvement in Auric Pacific's fundamentals in the past two years, although the improvement was "masked by non-cash, non-recurring impairment losses".

Auric Pacific incurred a net loss of S$40.9 million against S$432.9 million in revenue for the year ended Dec 2015 due to a write-off as a result of the rationalisation.

In a separate filing to the stock exchange in relation to the takeover offer, Auric Pacific updated shareholders that it was exploring another round of impairments for the full year FY2016, comprising customer relationships arising from the acquisition of the Food Junction business and certain leasehold improvement and equipment in its Delifrance factory. The unaudited carrying amount for these could come to $5.1 million, it said.

As for the deal valuation of Auric Pacific relative to the buyout of another household food-and-beverage play Super Group last year, CIMB Research appeared even less impressed.

The offer price implies core earnings multiples of 10.2 per cent and 9.6 per cent based on Auric Pacific's earnings forecast for 2017 and 2018 respectively - much lower than the offer for Super Group's shares, which were pegged at price earnings of 26-30 times, based on FY2016 earnings right up to 2018 prospective earnings.

Minority shareholders may wish to await the report by the independent financial adviser (IFA) on the fairness and reasonableness of the offer, said Mr Lee.

READ MORE: Lippo makes S$103m takeover offer for Healthway Medical