China Minzhong Food Corp. (MINZ), the vegetable processor that slumped a record 48 percent after a report by short-seller Glaucus Research Group, said its largest shareholder is considering a takeover bid.
PT Indofood Sukses Makmur, the biggest instant noodle maker in Indonesia that doubled its stake in Minzhong this year to 29 percent, may make an offer today, Putian, China-based Minzhong said in a statement, citing a letter from the Jakarta-based company. Minzhong, which is halted from trade, scheduled a press conference for 5 p.m. in Singapore.
Minzhong’s market value plunged to S$347 million ($272 million) on Aug. 26 after Glaucus questioned its accounts. Minzhong, 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.
A possible offer “is definitely a positive in the light of what’s happened,” said Kelly Teoh, Singapore-based market strategist at IG Markets. “It would give investors a sense of confidence.”
Minzhong last traded at 53 Singapore cents after plunging the most since its April 2010 share sale following the Glaucus report.
Indofood, which said last week it’s comfortable with its investment, paid an average of S$1.02 a share for its stake in Minzhong, according to Herman Koeswanto, an analyst at PT Mandiri Sekuritas.
The maker of noodle brands including Indomie, Supermi and Sarimi conducted due diligence before making its investment in Minzhong, Director Thomas Tjhie said Aug. 26, adding he had spoken to Minzhong’s chief financial officer about the Glaucus report. Tjhie declined to comment today.
The Indonesian company 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.
The statements by Glaucus, which has an office in Newport Beach, California, were made with the objective of driving down the company’s share price and gaining from the decline, Minzhong said yesterday. Soren Aandahl, Glaucus’s director of research, didn’t immediately respond to an e-mail seeking comment.
“The manner in which they made these statements and the conclusions which they drew from them 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.
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.
“Evidence indicates that Minzhong fabricated sales to its top two customers, suggesting that the company overstated revenues in its IPO prospectus by at least a third during the track record period,” Glaucus said.
The Chinese company said it has documentation, including sales contracts, to counter the allegations. Glaucus “used terms such as ‘doctored SAIC financials,’ ‘fabricated sales’ and ‘cover up,’ which they know or ought reasonably to have known are false or misleading,” Minzhong said.
Glaucus was founded by Matt Wiechert, a former investment banker, to probe companies that appear “too good to be true,” according to its website. It has also issued reports on Hong Kong-traded China Metal Recycling Holdings Ltd. and China Medical Technologies Inc. and SouFun Holdings Ltd. in New York.
Hong Kong’s securities regulator said in July it found evidence China Metal had inflated the size of its business and is seeking to wind up the company. China Medical filed for Chapter 15 foreign-firm bankruptcy protection in New York last year, while SouFun, China’s biggest real-estate website owner, has surged more than 70 percent since Glaucus’s April report.
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