Red Sena has appetite for Munchy Group

Good match: A worker checks products at Munchy’s factory in Batu Pahat. The privately held Munchy Group, which has a global presence with its wafers, biscuits and confectionery products, fit well into the profile of companies that Red Sena targeted.

PETALING JAYA: Special-purpose acquisition company Red Sena Bhd, which has raised funds to go into the food and beverage business, is eyeing a takeover of the Munchy Group.

Sources said the privately held Munchy Group, which has a global presence with its wafers, biscuits and confectionery products, fit well into the profile of companies that Red Sena targeted.

The Johor-based Munchy Group already has institutional shareholders following the entrance of Retirement Fund Inc (KWAP) and Tremendous Asia Partners Group in 2014.

It is learnt that both firms collectively own 30% stake in Munchy Group for an undisclosed amount.

It is noteworthy that KWAP used to be a substantial shareholder of Red Sena when it was listed in December 2015. However, the pension fund has sold down its interest and is no longer a substantial shareholder since January last year.

Red Sena raised RM400mil from its initial public offering, of which 92% or RM368mil of the proceeds were kept in a trust account for the acquisition of an asset related to the food and beverage (F&B) business.

The company is due to hold its AGM today and would need to come up with a proposal soon because it has to complete the acquisition of a qualifying asset (QA) by year-end.

According to Red Sena’s annual report, for it to complete the QA exercise within the timeframe permitted, the company has to sign a sales and purchase agreement by the end of this month.

As at end-September 2017, Red Sena had RM385.9mil in its trust account, translating to 48.2 sen cash per share. Red Sena closed at 47 sen yesterday.

The proposed QA needs to get 75% shareholder approval. For the deal to muster pass shareholder approval, the price of the stock must be above the cash per share.

For its maiden acquisition, Red Sena is targeting a minimum internal rate of return (IRR) of 9% for its QA.

Munchy would fit well within the criteria targeted by Red Sena of acquiring “branded packaged” F&B business that bears the halal certification.

Munchy Group has a distribution reach of over 45 countries and comes with a 20-year history in the biscuits and confectionary business. Its products include Oat Krunch, Lexus and Muzic. Interestingly, a fund management firm known as British Columbia Investment Management Corp (BCI) has been gradually increasing its stake in Red Sena, having more than 6% stake.

According to its website, BCI has C$135.5bil of managed assets.

Red Sena’s management team includes former CEO and executive director of the F&N Group Datuk Tan Ang Meng, who is Red Sena’s executive director and chief strategy officer, as well as former F&N chief financial officer Joseph Tan Eng Guan, who is the firm’s executive director and CEO.