Greater scope: Fraser & Neave Holdings are aiming to enhance their portfolio and expand their line of products with the proposed acquisition of Cocoaland.
PETALING JAYA: Fraser & Neave Holdings Bhd
’s (F&N) proposed acquisition of the entire equity interest in Cocoaland Holdings Bhd is expected to be synergistic, according to several research firms.
MIDF Research believes the privatisation of Cocoaland will enable F&N to expand its business into other packaged food segments.
“It appears this deal is synergistic as F&N does not have any products in the snacks and sweet segments,” MIDF Research said.
The research firm noted that the deal could grow F&N’s overseas business, adding that Cocoaland’s performance outside Malaysia was solid.
Due to stronger demand for gummies in Malaysia and an increased snack demand from Saudi Arabia, Cocoaland’s revenue for first quarter ended March 31, 2022 rose 21.5% year-on-year (y-o-y) to RM65.74mil, while its net profit surged 85.4% y-o-y to RM10.55mil.
MIDF Research said the privatisation of Cocoaland is value accretive for F&N as it diversifies the group’s business into other segments and expands the group’s customer base in overseas markets.
Meanwhile, UOB Kay Hian (UOBKH) Research said the rationale for the acquisition was in line with F&N’s ambition to build its halal packaged food as a fourth pillar of growth.
“F&N believes that the addition of Cocoaland will enhance its expansion in overseas markets,” UOBKH Research said. “Currently, close to 50% of Cocoaland’s revenue is export-driven, predominantly in Asia.”
UOBKH Research noted Cocoaland’s range of products do not appear complementary to F&N’s existing products of cooking condiments and seasoning.
The research house added that both companies could leverage on existing distribution network to lift sales.
UOBKH Research said F&N should remain at a net cash position even after the completion of the privatisation.
“Upon completion of the proposed privatisation, F&N’s 2023 earnings could be lifted by 4.7%,” UOBKH Research said.
On the other hand, CGS-CIMB Research was surprised by the proposed acquisition as it was of the view that F&N would focus on growing its product portfolio towards goods with less sugar content.
However, the research firm concur with F&N that the acquisition can fortify the group’s plan to expand its halal packaged food segment, an earmarked growth pillar.
“We expect strong business synergies, as F&N can broaden its product portfolio and market Cocoaland’s goods via its larger distribution network,” CGS-CIMB Research said.
TA Research believes the proposed acquisition may unlock the full potential of Cocoaland, although it may take a few years for F&N to realise the full benefit.
“Given F&N’s management’s track record, F&N may be able to unlock and realise the full potential of Cocoaland.
“However, we believe that it will take a few years before the synergistic benefit of the acquisition will be able to generate shareholder value and free cash flow for shareholders of F&N,” it said.
On June 3, F&N announced the proposed acquisition of 325.4 million shares or 72.34% of the share capital in Cocoaland for a total cash consideration of RM488.15mil or RM1.50 per share.
Currently, F&N holds 124.4 million of Cocoaland shares, representing approximately 27.66% equity interest in Cocoaland.
Upon completion of the proposed privatisation, Cocoaland will become a wholly-owned subsidiary of F&N.
