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Tuesday, September 3, 2013

Indofood offers $488 mil cash for rest of China Minzhong


PT Indofood Sukses Makmur, the largest shareholder of China Minzhong Food Corp., offered $488 million cash for the rest of the vegetable processor that had slumped after a short-seller’s allegations.

Indofood bid $1.12 a share for Putian, China-based Minzhong, the Jakarta-based company said today in a statement, giving the stock its biggest gain since its debut in 2010. The price is more than double the 53 cents that Minzhong fell to on Aug. 26 before the stock was suspended from trading.

Buying Minzhong will give Indonesia’s largest noodle maker control of a company that grows and exports vegetables from China to 26 countries after its market value plunged to $347 million last week. Minzhong yesterday rebutted Glaucus Research Group questioning of its accounts, saying the allegations were calculated to cause panic and drive down its shares.

“This is a big vote of confidence from Indofood and should assuage investors holding Minzhong stock somewhat, given that the offer is more than the last trading price and above what investors expected,” Kelly Teoh, a Singapore-based market strategist at IG Markets, said by e-mail.

Minzhong jumped to $1.135 as of 3:32 p.m. in Singapore, as it resumed trading for the first time since Aug. 26. The bid is priced at 6.9% more than Minzhong’s weighted average price for the previous three months, according to the statement.

Indofood slumped 9.2%, the most in almost two years, to 5,900 rupiah as of 2:31 p.m. in Jakarta.

Indofood said today it agreed to buy 25.6 million shares, bringing its stake in Minzhong to 33.5%, triggering the offer for the balance, according to the statement. United Overseas Bank Ltd., Indofood’s banker, confirmed the Indonesian company has sufficient resources for the offer, it said.

Indofood, which said last week it’s comfortable with its investment, paid an average of $1.02 a share for its stake in Minzhong, Herman Koeswanto, an analyst at PT Mandiri Sekuritas, said in a note before today’s announcement.

The maker of noodle brands including Indomie, Supermi and Sarimi also controls palm oil producers PT Salim Ivomas Pratama and PT Perusahaan Perkebunan London Sumatra Indonesia as well as Bogasari, Indonesia’s largest flour miller.

Minzhong may have fabricated sales and payments to its largest supplier, doctored accounts and overstated capital spending, Glaucus said in its report. It also questioned the food processor’s reported receivables and cash balances.

The statements by Glaucus, which has an office in Newport Beach, California, were “mischievous and calculated to cause panic and impose maximum damage on the price of the company’s securities for their own benefit,” Minzhong said in a 19-page statement yesterday, that was accompanied by invoices and pictures of its factory lines and warehouses.

Glaucus today said in a statement on its website that its comments were fair and stands by its belief that Minzhong made false and misleading statements when it sought to raise funds from public markets.

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