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View all search resultsInvestors wary of Indofood CBP’s acquisition of noodle maker Pinehill
The move is viewed as detrimental to Indofood’s financial condition despite the potential boost to its global market outreach, analysts have said.
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nvestors have dumped shares of processed food giant PT Indofood CBP Sukses Makmur following the company’s decision to acquire instant noodle manufacturer Pinehill Company. The move is viewed as detrimental to Indofood’s financial condition despite the potential boost to its global market outreach, analysts have said.
Indofood CBP’s shares, trading under ICBP on the Indonesia Stock Exchange (IDX), have dropped 7.3 percent since the company announced the acquisition plans on May 22, to Rp 8,900 (64 US cents) apiece on Tuesday. Parent company PT Indofood Sukses Makmur saw its shares, trading under INDF, drop 3.44 percent to Rp 6,300 during the same period.
“Judging from the share price movement, the impact of the [acquisition] is not very favorable as statements have surfaced that the acquisition is mostly financed by debt. Hence, investors are worried about the company’s future finances,” Jasa Utama Capital analyst Chris Apriliony told The Jakarta Post by text message on Monday.
On May 22, Indofood CBP signed an agreement worth US$2.99 billion with Pinehill Corpora Limited and Steele Lake, which own 51 percent and 49 percent of the acquired company, respectively. The former will receive $1.53 billion, and the latter, $1.47 billion.
The financing of the acquisition and its fees will be derived primarily from bank loans of around $2.05 billion, according to Indofood CBP’s information memorandum published on Monday. Meanwhile, the remaining $950 million will come from other long-term liabilities and cash.
Upon completion of the acquisition, Indofood CBP will be the 100 percent owner of Pinehill Company.
Anugerah Mega Investama director Hans Kwee said the large chunk of debt securities could potentially reduce future dividends.
