FGV buys China edible vegetable oils producer for RM976mil

For iSnap - lzfgv Workers at the Saji cooking oil production line of Delima Oil Products Sdn Bhd (DOP) factory, Felda Global Ventures Holdings Bhd's fully-owned subsidiary in Pasir Gudang, Johor. This production line runs 24 hours during the peak weeks every month. DOP handles midstream and downstream operations. It's final products include cooking oil, margarine, peanut butter and mayonaise.

KUALA LUMPUR: Felda Global Ventures Holdings Bhd (FGV) plans to expand its oils and fats capabilities in China by acquiring 55% of the paid-up capital of Zhong Ling Nutri-Oil Holdings Ltd for RM976.25mil.

In a filing with Bursa Malaysia yesterday, the agri-business giant said its unit Felda Global Ventures Downstream Sdn Bhd (FGVHB) had entered into two conditional agreements to acquire the 81.566 million shares in Zhong Ling Nutri-Oil, whose wholly-owned subsidiaries produce edible vegetable oil, chicken essence and flavouring (semi-solid and solid).

The first sale and purchase agreement (SPA 1) involves FGVHB buying a 26.4% stake for RM537.05mil. Under the second SPA (SPA 2), FGVHB will buy the remaining 28.6% for RM439.2mil.

Immediately after the completion of SPA 1, the FGV unit will engage an accounting firm to prepare and deliver to the parties the audited financial statements of the Zhong Ling Nutri-Oil group for financial years (FY) 2014 and 2015,

If the group’s consolidated net profit for FY14 was less than 309.7 million yuan (RM199.1mil), the vendor will transfer to FGVHB, for T$1.00 consideration, additional shares equalling to the percentage of net profit shortfall multiplied by the sale shares for SPA 1 and SPA 2.

If the net profit for FY15 was less than 313.5 million yuan (RM201.4mil), the vendor will transfer to FGVHB, for T$1.00 consideration, additional shares equalling to the percentage of net profit shortfall multiplied by the sale shares for SPA 1 and SPA 2.

On the rationale for the purchase, FGV said Zhong Ling Nutri-Oil, set up more than 20 years ago, had growing sales trend surpassing T$9.3bil (RM1.18bil) in 2013.

In 2013, the company’s sales rose by 25.5% from T$7.4bil (RM936.7mil) in the previous year, generating an average net profit margin of about 13.4%.

FGV said Zhong Ling Nutri-Oil’s flagship brand, Ostrich, contributed almost 70% of the company’s total sales.

“FGVHB is also expected to benefit from future growth in sales and distribution networks, particularly coming from the company’s (Zhong Ling Nutri-Oil) newly established operations in the province of Jiangsu,” it said.

According to FGV, the proposed acquisition is in line with FGVHB’s global strategic blueprint, i.e. to increase FGVHB’s downstream capabilities in destination markets.

FGV hopes to leverage on China’s economic growth and demand for edible oils.

“As the largest importer of edible oils, China consumes almost a quarter of the world’s total edible oils production. China’s increasing demand potential offers a prospective market for FGVHB to expand its downstream capability particularly in consumer packed goods business,” it said.