FRIDAY, March 29, 2024
nationthailand

CP Foods acquisition of HK unit to drive animal-feed growth strategy

CP Foods acquisition of HK unit to drive animal-feed growth strategy

Charoen Pokphand Foods yesterday announced the acquisition of CP Pokphand Co (CPP) in Hong Kong as part of its strategy to become one of the world’s top three animal-feed firms.


The acquisition will cost the equivalent of Bt66 billion (US$2.17 billion) to purchase a 74.18 per cent stake, at the price of 0.90 Hong Kong dollar (about Bt3.60) per share, from Orient Success International, Worth Access Trading and CPI Holding. These three companies are owned by the Cheravanont family under the Charoen Pokphand Group (CPG).


Adirek Sripratak, president and chief executive officer of Charoen Pokphand Foods, said the strategy was to encourage CPF to restructure its business in the region to achieve synergy, security and cost competitiveness.
“We intend to become one of the world’s top three feed-meal producers. Now we rank as the sixth or seventh,” Adirek said.


The deal will also help increase total CPF sales to Bt300 billion next year from this year’s estimated Bt210 billion. To complete the deal, CPF will issue 694 million new shares at the price of Bt30 each to raise capital. In addition, the company will make a cash payment Bt45.5 billion (US$1.49 billion) from its cash flow and loans.
The issuance of new shares would increase CPF’s paid-up capital from Bt7.52 billion to Bt8.21 billion.
However, the acquisition plan has to be approved by CPF’s board, which will then be proposed at a shareholders’ meeting on January 18.
At present, CPG holds 42 per cent of CPF; this will increase to 49.9 per cent after the new share issuance.
“CPF is to spearhead exploring business opportunities overseas by itself rather than relying on its subsidiaries. The strategy will strengthen the company’s bargaining power with trading partners,” Adirek said, adding that this restructuring was similar to what CPF did in 1999 to consolidate all related subsidiaries into branches of CPF.


He said the acquisition was predicted to generate 18 per cent return of investment per year thanks to CPP, which manages business not only in China but CP Vietnam Corporation (CPV). CPP’s main business in China under the Chia Tai brand has focused on animal feed in 28 provinces, accounting for 95 per cent of its total sales.
The deal will also support CPF’s strategy of directly expanding |business into both China and Vietnam. It will increase the contribution from its overseas business from 26 per cent of total revenue to 50 per cent.
Adirek added that the company had to lower this year’s total sales target a little from Bt220 billion to Bt210 billion because of the flooding. However, sales are still set to grow by 10-15 per cent next year.
 

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