G

iant food producer Indofood Sukses Makmur is divesting the stake it owns in noodle maker PT Nissinmas, terminating its two-decade joint venture with Japanese noodle giant Nissin Food Holdings Co.

Publicly listed Indofood owned 11.7 million shares in Nissinmas, or about 49 percent of the latter'€™s overall shares. Indofood was selling the stake, valued at US$5.44 million, to its Japanese partner, the company announced on Wednesday.

'€œOn Aug. 20, the company signed a conditional sale and purchase agreement with Nissin Foods Holdings Co. in relation to the company'€™s plan to divest the stake the company owns in PT Nissinmas,'€ Indofood said in a public announcement that was filed with the Indonesia Stock Exchange (IDX).

'€œThe transaction will be finalized when the necessary conditions have been met, including approval from Indonesia'€™s Investment Coordinating Board [BKPM] and approval from a PT Nissinmas shareholders'€™ meeting,'€ Indofood'€™s statement read.

The statement did not elaborate on the rationale behind Indofood'€™s divestment in Nissinmas.

Nissinmas launched commercial operations in 1992, with Indofood and Nissin each holding a 49 percent stake and Japanese trading company Nissho Iwai holding the remainder.

The joint venture marketed instant noodles under the Nissin brand'€™s cup noodles. Both Nissin and Indofood are among the top global players in noodle sales, with the first being the founder of instant cup noodles.

According to Indofood'€™s 2013 financial report, Nissinmas'€™ total sales for the year stood at Rp 17.24 billion ($1.47 million), contributing only about 0.03 percent to Indofood'€™s total annual sales.

Kiswoyo Adi Joe, an analyst from Investa Saran Mandiri, said the divestment was possibly driven by Nissinmas'€™ relatively low contribution to Indofood'€™s total sales.

'€œ[Nissinmas'€™] products do not sell well and are less competitive than Indofood'€™s other noodle products,'€ he said.

Indofood has its own subsidiary, Indofood CBP, which focuses on marketing its own instant noodle brand, Indomie.

The company has five strategic business lines that include consumer branded products (CBPs), Bogasari, agribusiness, distribution, as well as cultivation and processed vegetables.

CBPs contributed 44 percent to the group'€™s overall sales, while Bogasari '€” which makes Segitiga Biru and Cakra Kembar flour '€” accounted for 25 percent, the company'€™s first quarter data showed. Agribusiness made up 16 percent, cultivation and processed vegetables contributed 8 percent and distribution made up 7 percent.

CBPs also booked the highest year-on-year growth in sales compared to the other divisions, rising by about 24 percent to Rp 15 trillion.

'€œCBP products suit Indonesian tastes better, and this is actually a good business move because it enables Indofood to focus on its own brand,'€ he added.

Indofood booked Rp 34 trillion in net sales during the first six months of this year, up by 26.5 percent year-on-year.

It booked Rp 2.3 trillion in net profits during the January-June period, a 34 percent increase compared to the same period last year, thanks to the increase in net sales and the average selling price of its products.

Nissin Food'€™s history with Indofood dates back to in 1999, when the former attempted to purchase 60 percent of Indofood shares from tycoon Anthony Salim'€™s family, but backed down from the plan when it failed to secure approval from banks that did business with Indofood.

With Nissin having withdrawn from the plan, Hong Kong-based First Pacific Co. Ltd. '€” also controlled by the Salim family '€” acquired the Indofood shares, and now holds half of the noodle maker'€™s ownership.

'€” JP/Anggi M. Lubis