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Indofood Offers $383 Million in Cash for Rest of China Minzhong

Indomie Instant Noodles
Laborers unload boxes of PT Indofood CBP Sukses Makmur's Indomie instant noodles at a port in Pekanbaru, Riau province, Indonesia. Indofood said today it had agreed to buy 25.6 million shares, bringing its stake in China Minzhong Food Corp. to 33.5 percent, according to the statement. Photographer: Dimas Ardian/Bloomberg

PT Indofood Sukses Makmur, controlled by Indonesian billionaire Anthoni Salim’s investment company, offered S$488 million ($383 million) cash for the rest of China Minzhong Food Corp., the vegetable processor that slumped after a short-seller’s allegations.

Indofood bid S$1.12 apiece for Putian, China-based Minzhong, the Jakarta-based company said today in a statement, giving the stock its biggest gain since its debut in 2010. The price is more than double the 53 Singapore cents that Minzhong fell to on Aug. 26 before the stock was suspended from trading.

Buying Minzhong will give Indonesia’s largest noodle maker control of a company that grows and exports vegetables from China to 26 nations whose market value plunged to S$347 million last week. Minzhong yesterday rebutted Glaucus Research Group’s questioning of its accounts, saying the allegations were calculated to cause panic and drive down its shares.

“Minzhong shareholders should sell their shares to Indofood because at S$1.12 most of the investors are in the money,” said Wei Bin, an analyst at Maybank Kim Eng Holdings Ltd. in Singapore. “If you look at the announcements from Indofood and Glaucus, both of them give quite strong evidence. At this point in time, it’s very hard to judge who’s right and who’s wrong.”

Minzhong jumped to S$1.12 at the close in Singapore, as it resumed trading for the first time since Aug. 26. The bid is priced at 6.9 percent more than Minzhong’s weighted average price for the previous three months, according to the statement.

Stake Increases

Indofood slumped 9.2 percent, the most in almost two years, to 5,900 rupiah at the close in Jakarta. First Pacific Co, which controls Indofood, was halted from trading in Hong Kong at HK$8.30 today. The Asian utilities and resources group had a 50.1 percent stake in Indofood as of March 19, according to the company’s 2012 annual report.

Indofood said today it agreed to buy 69.5 million shares, bringing its stake in Minzhong to 44.1 percent. The company said earlier that it had triggered an offer for the balance of the target’s stock. United Overseas Bank Ltd., Indofood’s banker, confirmed the Indonesian company has sufficient resources for the offer, it said.

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, Herman Koeswanto, an analyst at PT Mandiri Sekuritas, said in a note before today’s announcements.

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.

Doctored Accounts

“The last one week has been a harrowing experience,” Siek Wei Ting, Minzhong’s chief financial officer, said today at a briefing in Singapore. “As far as operations are concerned, it’s business as usual.”

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.

Glaucus today said in a statement on its website that its comments were fair and stands by its belief that Minzhong made false and misleading statements when it sought to raise funds from public markets.

The company is currently consulting legal advisers and will make a decision after that on whether it will take action against Glaucus, Lim Yeow Hua, Minzhong’s independent director, said at the briefing today.

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