CPF board approves share-swap deal for Chinese subsidiary's acquisition plan
The board of Directors of Charoen Pokphand Foods Pcl (CPF) last Friday agreed to seek shareholders’ approval for its subsidiary in China to acquire 43 companies in the swine business through the issue of new shares as payment to the seller.
The move aims to integrate the business as one of the leading swine producers in China, which is the world’s largest pig market worth US$200 billion with an average annual growth of 8.3 per cent during the 10 years from 2010 to 2019 (according to China’s National Statistical Office).
Chia Tai Investment Co Ltd (CTI), whose main business is feed manufacturing and distribution in China, is an indirect subsidiary of CPF via CP Pokphand Co Ltd (CPP), a company listed on the Hong Kong Stock Exchange.
The proposal will facilitate the integration of its feed production in China with the swine business, which is now managed by Chia Tai Animal Husbandry Investment (Beijing) Co Ltd, a subsidiary of Charoen Pokphand Group.
The proposed deal aims to acquire 43 companies of Chia Tai Animal Husbandry Investment (Beijing) worth 28.14 billion renminbi (Bt131.287 billion). CTI will issue new shares as payment to the seller without incurring any financial burden.
Entering into this business will create business opportunities for CTI by penetrating more swine business markets with high growth potential like China, the company said. It is also a vertical integration of CTI to achieve an integrated swine business operation covering feed, farm and slaughter, throughout processing.
The company said this strategy would encourage efficiency to deal with market changes as well as combine expertise in its value chain.
The share-swap deal is expected to allow CTI to gain higher profits from swine business expansion thanks to the lucrative pork price. The company said the deal would also help higher efficiency cost and business management to benefit its investment in the long run.
Since this merger is a connected transaction, the acquisition requires approval from small shareholders. CPF will hold the first extraordinary shareholders' meeting on October 27.
