CP Foods to acquire $2.1bn stake in CP Pokphand

Charoen Pokphand Foods (CP Foods), a Thailand-based meat and animal feed company, has agreed to purchase a 74% stake in Hong Kong-based affiliated company CP Pokphand (CPP) for $2.1bn, as part of its strategy to expand its business in China and Vietnam.

CP Foods, a subsidiary of Thailand-based conglomerate Charoen Pokphand Group (CP Group), plans to purchase CPP’s common stocks totalling 18.8 billion shares or 74.18%, for a purchase price of HK$ 0.90 ($0.11) a share.

The company said it will issue new shares totalling 694 million to CP Group at THB30 ($0.94) a share and take $1.49bn in overseas loans to fund the purchase, following which CP Group’s ownership in CP Foods will increase from 41% to 49%

CPP comprises two major units, the China business and Vietnam business, with the China unit engaged in the feed business and for the first six months of 2011, it reported sales revenue of $1.19bn and net profit of $64m.

The Vietnam business is involved in manufacturing and distribution of animal feed, breeding and farming of livestock and aquatic animals, plus processing and production of meat and packaged food products.

The China and Vietnam businesses have seen an average sales growth rate of 20% a year for the past three years.

To capture the increasing food demand, CP Foods has been investing in farms and facilities in countries such as India, Turkey and Russia.

CP Foods president and CEO Adirek Sripratak said this latest transaction will allow the company to gain access to 28 provinces in China and will help to boost its annual profit by 20% and sales by 50%.

So far in 2011, the agricultural operations industry has seen 225 deals worth $8.7bn, compared with $13.8bn in 2010.