LEADING canned food producer Century Pacific Food Inc. (CNPF) has invested P4.5 billion to acquire 100 percent of a sister company engaged in integrated coconut production, a deal seen boosting its profitability.
In a disclosure to the Philippine Stock Exchange on Tuesday, CNPF said it had acquired Century Pacific Agricultural Ventures Inc. (CPAVI), which produces high value organic- certified and conventional coconut products for both export and domestic markets.
The deal was valued at a “meaningful discount” to CPAVI’s value based on discounted cash flows and peer benchmarking of listed comparable firms, the disclosure said.
With the consolidation of this coconut enterprise into its books, the deal is seen to increase CNPF’s 2016 earnings by 7-8 percent and improve net profit margins.
“The global trend towards healthy and organic coconut products is growing rapidly in developed economies like the US and Europe. This is an area where Philippine industry has an advantage and can be globally competitive,” said CNPF president Christopher Po said in a press statement.
“We think this new business will be a great addition to Century Pacific Food Inc.’s portfolio and another leg to sustain and drive the company’s future growth.”
CPAVI is a profitable company with comparatively lower variable costs versus other global competitors and strategically located where coconut supply is abundant and sustainable, based on the disclosure. The company has multi-year agreements with major customers, thus seen ensuring continued business and revenue growth. It is now seen to benefit from CNPF’s expertise in private label export and dealing with international food rules and regulations.
For CNPF, this acquisition is seen in line with its goal to cement itself as a leading player in growing food markets. Global food companies have seen an increased appetite to search for acquisition targets in higher growth, health-conscious and organic product categories.