Century Pacific invests P4.5B in coco firm

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 Monday, CNPF said it had acquired General Santos-based 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” based on cash flows and peer benchmarking of listed comparable firms, the disclosure said.

With the inclusion of this coconut enterprise into its books, the deal is seen to increase CNPF’s 2016 earnings by 7 to 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 the Philippine industry has an advantage and can be globally competitive,” 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. It is strategically located where coconut supply is abundant and sustainable, the disclosure also said.

The company has multiyear agreements with major customers, ensuring continued business and revenue growth. It is also seen to benefit from CNPF’s expertise in the export market as well as in international food rules and regulations.

For CNPF, the acquisition is in line with its goal to cement itself as a leading player in the growing food market. Global food companies are on the lookout for acquisition targets in higher growth, health-conscious, and organic product categories.

This acquisition will be funded through 50 percent cash and 50 percent new shares issuance.

CNPF will issue 128.2 million primary shares at a price of P17.55 each, equivalent to a 4.41 percent premium over CNPF’s 30-day volume weighted average price as of Oct. 26 and a 3.85 percent premium from its closing price on the same day.

CNPF shares are being issued at a premium to demonstrate confidence in the combined CPAVI and CNPF businesses, the disclosure said.

Meanwhile, the balance of P2.25 billion will be sourced from existing cash and bank borrowings.

Prior to the acquisition, CPAVI was a wholly owned subsidiary of Century Pacific Group, Inc. (CPGI), the parent company of CNPF.  As of end-September, CPGI owned 72.2 percent of CNPF. This will increase to 73.7 percent after the acquisition.

CNPF said it had undertaken a comprehensive due diligence process to assess the financial merits of acquiring CPAVI.  The company engaged Evercore Asia Ltd. to act as its financial advisor, Cayetano Sebastian Ata Dado & Cruz Law Offices to conduct legal due diligence and BDO Capital & Investment Corp. to provide a third-party fairness opinion.