KUALA LUMPUR (Jan 18): Penang-based poultry farmer CAB Cakaran Corp Bhd has proposed to undertake a private placement of 15.06 million new shares, representing a substantial 9.1% stake, to Indonesia's Salim Group for RM31.18 million or RM2.07 per placement share.
The issue price of RM2.07 represents a premium of 26.22% to the five-day weighted average market price of CAB shares up to and including Jan 15.
In a filing with Bursa Malaysia today, CAB said it has entered into a placement agreement with Plant Wealth Holdings Ltd, a company controlled by KMP Investments Pte Ltd, which in turn is 67% owned by Salim Group chairman, Anthoni Salim.
Anthoni controls some 45% of the Salim Group. According to Forbes, the Salim family is Indonesia's third-richest family in 2015, with a net worth of US$5.4 billion (RM23.76 billion).
The Salim Group is one of Indonesia's biggest conglomerates with interests ranging from palm oil plantations to media companies. Salim Group's Indofood Sukses Makmur also owns the world's largest instant noodle producer.
CAB said the proceeds raised from the placement will enable the company to reduce its bank borrowings from RM193.13 million as at the latest audited Sept 30, 2015 to RM183.13 million and will be used as general working capital, and will help reduce its gearing from 1.05 times to 0.74 times.
"The equity participation of KMP Private Ltd via Plant Wealth as a strategic investor in CAB will indirectly allow CAB to strengthen the company's alliance with KMP Private Ltd and maintain a collaborative relationship.
"By leveraging on KMP Private Ltd's market presence in Indonesia in the aspects of agribusiness and fast moving consumer goods, KMP Private Ltd's capital relationship with CAB via Plant Wealth may facilitate CAB's growth in the regional front, which as a result will contribute to the benefits of CAB's customers and the existing shareholders of CAB," said CAB.
The proposed private placement is expected to be completed by the second quarter of 2016.
The Edge Financial Daily had on Dec 7 last year reported that the Salim Group could be eyeing as much as a 20% stake in CAB, as the two companies were understood to be in talks for quite some time.
On the same day, CAB announced to the local bourse its joint venture (JV) agreement with Salim's special purpose vehicle (SPV) company in Indonesia for the purpose of establishing a fully integrated poultry business in Indonesia.
Under the JV agreement, the SPV would set up and hold a 90% stake in the new JV company and CAB would hold the balance 10%. However, CAB will have the option to increase its shareholding up to 30% in the next three years after the initial set-up, depending on its financial condition.
CAB, the largest poultry company in the northern region of Malaysia, is looking for more mergers and acquisition activities domestically to enlarge its current production capacity. It targets to produce over 5 million birds per month next year.
The company currently has 10 breeder farms and 140 broiler farms throughout Peninsular Malaysia.
It currently produces 4.2 million broiler birds per month, which is 20% higher than the 3.5 million birds it produced last year. The increase was mainly contributed by its newly acquired farm in Johor.
CAB shares closed up seven sen or 4.22 % at RM1.73 today, with a market capitalisation of RM259.1 million.
(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)