Gokongweis buy top Malaysian biscuit maker for P23B

Gokongwei-led Universal Robina Corp. (URC) has cemented its position as a Southeast Asian consumer powerhouse with a P22.9-billion deal to buy Malaysia’s No.1 biscuit maker, Crunchy Foods Sdn. Bhd. The seller is CVC Asia IV, a fund managed by private equity firm CVC Capital Partners, which had invested in Crunchy in 2018.

URC’s subsidiary URC Snack Foods (Malaysia) Sdn. Bhd. signed the agreement to acquire 100 percent of Crunchy Foods, which fully owns Munchy Food Industries Sdn. Bhd. and its wholly-owned unit Munchworld Marketing Sdn. Bhd.

Crunchy’s brands include Munchy’s Cream Crackers, LEXUS Cream Sandwich, Oat Krunch, Muzic Wafer and Choc-O cookies, which are also available in more than 50 countries globally. Apart from biscuits, the group also produces confectionery.

The transaction has been approved by the board of directors of both companies and is expected to close by December 2021 subject to fulfillment of customary closing conditions.

“URC is delighted to announce the acquisition of Munchy’s which will add immediate value to our international product portfolio, and scale up our Malaysian market position to leadership in the biscuits category,” URC chief executive officer Irwin Lee said.

“Munchy’s, with its strong brands, talented organization and operational excellence, is a great strategic fit with URC. Together, we will be able to further expand the footprint of URC and Munchy’s brands and unlock growth synergies in Malaysia as well as across the Asean (Association of Southeast Asian Nations) region.”

The final consideration will be disclosed upon completion and closing of the transaction, the disclosure added. The transaction value of 1.925 billion Malaysian ringgit—or about P22.9 billion—is on a cash-free and debt-free basis. This means that the price tag was based on an enterprise valuation that excluded cash and debt in Crunchy Foods’ books.

The deal looks “a bit expensive”—equivalent to about 36 times Crunchy’s 2020 earnings—considering that URC is only trading at 27 times its earnings last year, said COL Financial analyst Justin Cheng. “However, Crunchy Foods as a group, was able to grow faster than URC in 2020, achieving mid-single digit topline growth and margin expansion to grow earnings before interest and taxes at 13 percent. This is compared to URC’s mid-single digit growth,” he said.

In 2020, Crunchy and its subsidiaries booked a net profit of 53.26 million ringgit (P633.86 million) out of 418.9 million ringgit in revenues (P4.98 billion). The group grew its revenues by 4.7 percent and improved its operating margin to 40.2 percent from 39.8 percent in 2020 despite the prolonged pandemic.

While majority of URC’s consumer food business is generated from the Philippines, it has expanded aggressively into Asean, Australia and New Zealand over the years, making it one of the few Filipino multinational corporations. Overseas business accounted for 31 percent of its sales in 2020.

Earlier this year, it announced its exit from Australia and New Zealand to focus on other emerging markets.

For this transaction, URC is “the perfect new home for Munchy’s and we wish them the very best for the future,” said Alvin Lim, senior managing director of CVC, the selling party.

Rodney Wong, Munchy’s CEO, said: “We are excited to become part of URC. This move will allow Munchy’s to have access to research and development expertise in multiple categories, enhance market knowledge, route to market and manufacturing capabilities in countries outside of Malaysia. This will translate to development of innovative forward-thinking offerings to our consumers and strengthen our presence in the Asean market.”

“Both companies share a common purpose, values and ambition where we both put people first in everything we do, looking to delight everyone with good food choices and inspire happiness together. We would like to thank CVC for their expertise and support over the last three years and look forward for the next phase of profitable growth for Munchy’s,” he added.

Trading on URC had been suspended effective 9:08 a.m. on Friday at the local stock exchange pending submission of a comprehensive disclosure on this transaction. The Philippine Stock Exchange invoked the rule on disclosure of substantial acquisitions and reverse takeovers.