TUF-pakfood link-up to create top shrimp product exporter

TUF would purchase 40 per cent of PPC, the country’s leading shrimp processor, in a cash deal that is scheduled to close by the second quarter of next year.

TUF would then become the country’s biggest shrimp-products exporter with total daily production of 400 tonnes, as both TUF and PPC can now produce up to 200 tonnes per day. TUF would also be able to achieve its target of US$4 billion (Bt125 billion) in sales earlier – by 2013 instead of 2015.

TUF president Thiraphong Chansiri said the deal would strengthen the two companies’ competitiveness and ability to serve rising demand in the EU and US markets.

After due diligence, TUF will immediately proceed to purchasing the shares of PPC’s major shareholders through a voluntary tender offer. The tender offer is expected be launched in March at the book value at the end of this year. After that, the company will make another offer for the holdings of small shareholders.

TUF is expected to hold no less than 40 per cent of PPC after the tender-offer process is completed.

"The deal is a happy deal; however, the share price should wait until the 2011 fiscal year is closed," he said.

The average price of PPC’s stock during the first nine months was Bt29.5 per share, he said, adding that the total consideration was not big and would not demand much money.

The deal will expand TUF’s shrimp market and boost its profits, as PPC will pay a better dividend at 50 per cent of its profit.

Wiwat Kanokwatanawan, chief executive officer of Pakfood, said his group would remain the major shareholder in PPC with more than 50 per cent and would send five representatives, or half, to PPC’s committee to lay down a marketing strategy jointly.

"We started on the deal more than a year ago to reach agreement. We had to choose a partner that had the same business philosophy," he said.

For PPC, the deal will strengthen not only its manufacturing, as it is now running at 50-60 per cent of full capacity, but also its export market. It will also widen the market of its ready-to-eat shrimp products.

Last year, PPC reported a loss on total sales of Bt8 billion to Bt9 billion.

Thiraphong said TUF’s total sales are now projected at Bt3.1 billion this year, higher than its previous forecast of Bt3 billion.

The financial crises in the EU will not hurt the company’s operating results thanks to its strong fundamentals. The company’s exports to the EU account for 33 per cent of its total sales, while the United States accounts for 36 per cent. The rest is from the local market.

The company is set to grow by 20 per cent next year in sales and profit. It has prepared a capital expenditure budget of Bt3 billion for organic expansion, excluding mergers and acquisitions, he added.