Cerebos take-private

Suntory aiming to take Singapore's Cerebos private

The Japanese food and beverage company is delisting its Singapore subsidiary as part of a regional reorganisation.
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Brand's Essence of Chicken claims to extract crucial brain-nourishing ingredients from chicken
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<div style="text-align: left;"> Brand's Essence of Chicken claims to extract crucial brain-nourishing ingredients from chicken </div>

Suntory, a leading Japanese food and beverage group, said yesterday that it was seeking to delist Cerebos Pacific from the Singapore Exchange as part of a drive to take stronger control of its disparate Southeast Asia businesses.

The Japanese group already owns 83% of Cerebos and is planning to transfer its shares to Suntory Beverage & Food Asia, which it created last September to spearhead its regional strategy. It has offered to pay S$6.60 ($5.30) a share to buy out the minority shareholders, valuing Cerebos at S$2.1 billion and representing a 22.7% premium to the closing price of S$5.38 on Monday, the last trading day before the stock was suspended. Based on its 2011 numbers, Suntory is paying the equivalent of 10.6 years of earnings (before interest, taxes, appreciation, depreciation and amortisation).

The deal comes at the same time as a fight for control of Asia Pacific Breweries, the Singapore-based maker of Tiger Beer, between ThaiBev and Heineken. The Dutch brewer’s $4.1 billion takeover bid values Asia Pacific Breweries at more than 17 times its earnings, though it is considerably bigger than Cerebos.

The proposed delisting is subject to shareholder approval, with a 10% blocking vote needed to prevent the deal from going ahead. Given the size of Suntory’s holding, it is unlikely to meet any opposition. Nomura is acting as exclusive financial adviser to Suntory.

Assuming it wins the go-ahead, Suntory will pay roughly S$365 million to buy out the minority shareholders, plus about S$16 million for the options held by senior management.

Cerebos is best known as the maker of Brand’s Essence of Chicken, a popular health food supplement in Asia, as well as a range of other health foods. Suntory has owned the company since 1990 and said in an announcement to the stock exchange that it was taking Cerebos private to integrate it into its new Southeast Asian business structure, which it said would “optimise the use of resources in pursuit of growth prospects in the face of current economic uncertainty”.

This is a common theme for Japanese companies. Sluggish growth at home, particularly in the wake of the Tohoku earthquake, has encouraged many businesses to expand their horizons in the search for growth markets. Neighbouring Asian countries clearly offer attractive growth prospects, though big acquisitions can be hard to come by — hence the battle for ownership of Asia Pacific Breweries.

Suntory added that it was delisting Cerebos because the company had no need to raise more equity in the “forseeable future”. It also noted that the stock barely traded anyway. The total turnover during the past year represented less than 3.1% of its outstanding share capital. Taking the company private will eliminate the costs associated with maintaining its listed status.

It will also mark another step in Suntory’s plan to integrate its regional businesses under Suntory Beverage & Food Asia. It is also keen to make acquisitions to add to its portfolio in Southeast Asia. In June, it bought a 51% stake in Narang Connect, an Indian non-alcoholic beverages company.

Suntory’s business in Asia includes a stake in Tipco, Thailand’s biggest maker of fruit juice, and a joint venture with Garuda Food in Indonesia, which it signed last October. In 2009 it bought Frucor, a beverage company that makes the leading carbonated energy drink in Australia and New Zealand.

¬ Haymarket Media Limited. All rights reserved.

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