JAKARTA -- Indofood Sukses Makmur, Indonesia's largest food company, has said it will sell a 52.94% stake in Singapore-listed China Minzhong Food to an investment vehicle led by China Minzhong's chairman and CEO, Lin Guo Rong.
Indofood, controlled by Chinese-Indonesian tycoon Anthoni Salim, said China Minzhong Holdings, incorporated in the British Virgin Islands, has offered to buy 347 million shares at 1.2 Singapore dollars each. That would make for a S$416 million ($312 million) purchase. Details of when the shares are to be sold have not been disclosed, but the announcement sent China Minzhong Food's shares soaring 21% on Friday, to S$1.04.
Indofood's stock also jumped on Friday, by 10%, then fell slightly in early trading Monday.
In a research report issued Monday, brokerage Mandiri Sekuritas said Indofood will post capital gains as it acquired the shares at a lower price. Indofood initially obtained about 15% of China Minzhong Food in early 2013. It increased its stake to 82.88% after Glaucus Research, an investment house that specializes in short selling, accused China Minzhong Food of fabricating its financial statements.
In a press release in September 2013, Indofood said the deal would "generate long-term financial and strategic value" to both companies.
But analysts say synergy between Indonesia's biggest instant noodle producer and a Chinese vegetable purveyor has been limited. China Minzhong Food suffered a steep decline in revenue in the recent July-September period.
Indofood has been trying to diversify its domestic operations. The strategy has seen it partner with Brazil's BRF, the world's largest poultry company.
The share sale is expected to hurt Indofood's earnings in the near term. China Minzhong Food contributed 736 billion rupiah ($58 million) to Indofood's January-September operating profit, or around 12% of the total.