Indofood sank 7.7 percent after it offered to buy the remaining Minzhong stock it doesn’t already own for S$1.12 a share as compared to its last traded price of S$0.53 in an attempt to preserve value of its investments

Indonesia Stocks Drop Most in Asia After Trade Gap; Rupiah Falls

Indonesian stocks declined most in Asia and the rupiah weakened after the government unexpectedly reported the biggest trade deficit since at least 2007.

The Jakarta Composite Index fell 2.1 percent to 4,106.08 at 2:15 p.m. local time, after climbing 0.3 percent earlier. PT Indofood Sukses Makmur (INDF), the nation’s biggest instant-noodle maker, sank 7.7 percent after it offered to buy China Minzhong Food Corp. The rupiah depreciated 0.2 percent to 10,940 per dollar and one-month non-deliverable forwards on the currency declined 0.3 percent to 11,473, data compiled by Bloomberg show.The trade gap in July reached $2.3 billion, exceeding all 16 estimates in a Bloomberg News survey. Indonesia raised its reference rate by half a percentage point at an additional meeting last week, while the government said Aug. 23 it will allow more mineral exports this year as policy makers seek to narrow the trade gap and stem declines in the rupiah that have fueled inflation. The Jakarta stock gauge sank 9 percent in August and the rupiah weakened 5.9 percent.

“The widening deficit shows how serious Indonesia’s economic condition is,” said Edwin Sebayang, the head of research at PT MNC Securities in Jakarta. “This is what caused the reversal in the stock market.”

Consumer prices climbed 8.79 percent last month from a year earlier after an 8.61 percent gain in July, a separate report from the Statistics Bureau showed today. The increase was the biggest since January 2009 and compared with the 8.95 percent median estimate in a survey of 21 economists.

Indofood Offer

The nation’s current-account gap widened to a record $9.8 billion in the second quarter, according to central bank data released last month.

Indofood offered to buy the remaining Minzhong stock it doesn’t already own for S$1.12 a share, according to a statement today. Minzhong traded at S$0.53 before it was halted in Singapore. The vegetable processor slumped 48 percent on Aug. 26 after a report by short-seller Glaucus Research Group that questioned the company’s accounts. Minzhong denied the allegations.

PT Astra International (ASII), Indonesia’s biggest auto retailer, fell 3.3 percent. PT Unilever Indonesia declined 2.2 percent. PT Bank Mandiri (BMRI), the nation’s largest lender by assets, retreated 2.8 percent.

To contact the reporters on this story: Harry Suhartono in Jakarta at hsuhartono@bloomberg.net; Yudith Ho in Jakarta at yho35@bloomberg.net

Indofood Offers $383 Million Cash for Rest of China Minzhong

PT Indofood Sukses Makmur, the largest shareholder of China Minzhong Food Corp., offered S$488 million ($383 million) cash for the rest of the vegetable processor that had slumped after a short-seller assault.

Indofood offered S$1.12 a share for Putian, China-based Minzhong, the Jakarta-based company said today in a statement. That’s more than double the 53 Singapore cents that Minzhong fell to on Aug. 26 before the stock was suspended from trading.

Minzhong’s market value plunged to S$347 million last week after short-seller Glaucus Research Group questioned its accounts. The company, which grows and exports vegetables from China to 26 countries, yesterday denied the allegations, saying they were calculated to cause panic and drive down its shares.

Indofood said today it had agreed to buy 25.6 million shares, bringing its stake in Minzhong to 33.5 percent, according to the statement.

The maker of noodle brands including Indomie, Supermi and Sarimi also controls palm oil producers PT Salim Ivomas Pratama and PT Perusahaan Perkebunan London Sumatra Indonesia as well as Bogasari, Indonesia’s largest flour miller.

Minzhong may have fabricated sales and payments to its largest supplier, doctored accounts and overstated capital spending, Glaucus said in its report. It also questioned the food processor’s reported receivables and cash balances.

The statements by Glaucus, which has an office in Newport Beach, California, were “mischievous and calculated to cause panic and impose maximum damage on the price of the company’s securities for their own benefit,” Minzhong said in a 19-page statement yesterday, that was accompanied by invoices and pictures of its factory lines and warehouses.

To contact the reporter on this story: Michelle Yun in Hong Kong at myun11@bloomberg.net

Indofood swoops in to buy embattled China Minzhong for $382 million

5:23am EDT

By Anshuman Daga and Eveline Danubrata

SINGAPORE (Reuters) – Indonesia’s Indofood, one of the world’s biggest instant noodle makers, has launched a takeover offer for China Minzhong that values the food producer at S$734 million ($575 million), just days after an attack by a short-seller eroded almost half of the Chinese firm’s market value.

Indofood Sukses Makmur Tbk PT (INDF.JK: Quote, Profile, Research, Stock Buzz), the top shareholder in Singapore-listed China Minzhong Food Corp Ltd (CMFC.SI: Quote, Profile, Research, Stock Buzz), said it had increased its stake to 33.49 percent after buying additional shares from the market at S$1.12 per share, which kicked off a mandatory offer for the remaining shares at the same price. The agreement to buy the shares it does not own would cost Indofood $382 million.

The deal comes after Minzhong’s stock market value plunged to $273 million last week following a 49-page report by California-based Glaucus Research on accounting issues at the company. Minzhong has rejected any irregularities.

In a similar move last year, Singapore state investor Temasek Holdings Pte Ltd raised its stake in commodities firm Olam International Ltd (OLAM.SI: Quote, Profile, Research, Stock Buzz) after short-seller Muddy Waters questioned Olam’s business practices, highlighting how large shareholders can take advantage in a time of crisis.

Indofood and Minzhong could benefit from the closer cooperation, analysts said.

“I think Indofood sees some form of synergistic value because Minzhong is more in the upstream raw materials business and Indofood makes noodles,” Roger Tan, CEO of Voyage Research in Singapore, said ahead of Indofood’s announcement.

Shares in Minzhong, which had been suspended since the selloff last week, more than doubled to match the offer price of S$1.12 after trading resumed on Monday. Indofood’s shares fell 9 percent.

Indofood, controlled by Indonesia’s wealthy Salim family, has made some big acquisitions in the agribusiness sector in the past few years.

Indofood doubled its stake in Minzhong in March when it bought shares from Singapore sovereign wealth fund GIC for S$1.12 a share. Minzhong was listed in 2010.

Under Singapore law, a single shareholder needs to make a mandatory takeover offer for the target company if its stake increases to 30 percent.

STRONG DEFENCE

The report by Glaucus was the first attack by a short-seller on a Singapore-listed Chinese firm, although in recent years short-sellers have targeted Chinese companies listed in Hong Kong, Canada and the United States, citing irregularities.

On Sunday, Minzhong issued a strong defense of its business in a 19-page statement, saying it had completed its review of the report released by Glaucus and strongly rejected what it viewed as “reckless opinions” and “inferences” drawn by the short-seller.

“We reiterate that most of the issues raised by Glaucus with regard to the financials of the company arose out of a complete lack of understanding of the way we conduct our business as well as the operating environment in the People’s Republic of China,” it said.

Minzhong said it had not fabricated its sales or accounts as alleged by Glaucus. In its defense, Minzhong showed tax filings, and said it had documents and photographs to confirm capital expenditures.

Glaucus stood by its report on Monday.

“After needing a full week to prepare answers to the most basic questions about its business, we believe that Minzhong’s response is not only inadequate, but that it also raises a host of additional red flags which further corroborate our underlying thesis,” Glaucus said in a statement. ($1 = 1.2768 Singapore dollars)

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: