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Indofood Agri Resources and Star Pharmaceutical see controlling shareholders up their stakes

Benjamin Cher
Benjamin Cher • 3 min read
Indofood Agri Resources and Star Pharmaceutical see controlling shareholders up their stakes
(Sept 23): Indofood Agri Resources’ controlling shareholder, Indofood Singapore Holdings, has raised its stake in the company, following a failed takeover bid in June.
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(Sept 23): Indofood Agri Resources’ controlling shareholder, Indofood Singapore Holdings, has raised its stake in the company, following a failed takeover bid in June.

On Sept 11 and 17, PT Indofood Sukses Makmur, a holding company of Indo food Singapore, acquired 12.9 million shares and 369,500 shares respectively in Indofood Agri. The two transactions totalled $4.3 million and gave Indofood Singapore an 81% stake in Indofood Agri via direct and deemed interest.

Indofood Singapore has been buying Indofood Agri shares on the market since July, when its stake was only 74.3%. The company’s results continue to be lacklustre. Revenue for 2QFY2019 ended June 30 fell 6.6% to IDR3.1 billion ($302,859), while losses surged 215% to IDR216.5 million.

Weak agricultural commodity prices continue to have a negative impact on Indofood Agri’s oil palm and sugar operations. Lower contributions from the plantation division were partly mitigated by higher sales contribution from the edible oils and fats division. The former was hit by lower selling prices of palm products and crude palm oil, resulting in a 19% fall in revenue from the division.

Star Pharmaceutical is seeking a delisting. Star Pharmaceutical Holdings, a company controlled by Star Pharmaceutical executive chairman, Xu Zhibin, is looking to take the company private. Xu has been upping his stake in the company since the takeover offer was announced on Aug 5.

On Sept 10, he bought 600 shares in Star Pharmaceutical; on Sept 11, he bought 9,800 shares; on Sept 12, he bought 2,000 shares; and on Sept 17, he bought 10,000 shares. Xu, who bought the shares at 45 cents each, now controls 82.4% of all the shares via direct and deemed interest, placing him in a better position to take Star Pharmaceutical private.

Shareholders were offered 45 cents a share, a premium over the trading price of the shares. The rationale for delisting is similar to that of Indofood Agri, with Star Pharmaceutical Holdings looking for greater flexibility and control in implementing strategic initiatives or operational changes.

The offer came shortly after the company announced its results for 1QFY2019 ended March 31. Revenue surged 83% to RMB123.2 million ($23.9 million), but earnings grew just 1% to RMB6.9 million. The surge was due to higher revenue from its other specialised drugs segment, which grew 113% to RMB113.2 million and accounted for 91% of revenue. Cardiovascular and cerebrovascular drugs also grew 23% to RMB1.8 million and accounted for 2% of revenue. Antibiotics sales fell 36% to RMB8.3 million and represented 7% of revenue.

Earnings were affected by higher costs, however, with selling and distribution expenses rising 120% to RMB85 million, owing to higher sales revenue. For the quarter, administrative expenses rose 6% to RMB4.4 million, and tax expenses rose to RMB2.4 million, from RMB0.6 million.

Star Pharmaceutical has forecast a challenging outlook for the industry in China, as the government has implemented requirements for purchase-with-target-quantity and generic-drug-consistency evaluation of listed chemicals.

“There will be stricter requirements in R&D, production and sales for pharmaceutical companies,” the company says.

It appears, however, that the takeover bid has temporarily stalled, with the closing date extended to Oct 7, from Sept 16. As at Sept 16, shareholders holding 4.9% of the total shares had accepted the offer, whereas the offeror and concert parties held only 54.8%.

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