China Food Company PLC Update on Sale of Fuss Feed (8895H)
July 18 2012 - 2:00AM
UK Regulatory
TIDMCFC
RNS Number : 8895H
China Food Company PLC
18 July 2012
Press Release 18 July 2012
China Food Company Plc
("China Food" the "Company" or the "Group")
Update on Sale of Fuss Feed
China Food Company plc (AIM: CFC), a leading Chinese
manufacturer of cooking and dipping sauces, is pleased to announce
that its 100% subsidiary, Full Fortune Holdings Pte Ltd has entered
into an agreement with Wisehand Planning Co., Ltd ("Wisehand" or
the "Buyer"), a Korean-owned investment holding company, to dispose
of the Group's animal feed business, for a total consideration of
US$16 million (the "Disposal"). The Group's animal feed business
achieved profit after tax of approximately GBP1.6 million in 2011
and thus the total consideration represents an exit multiple in
excess of six times post tax earnings.
The consideration will consist of three components:
i) the existing animal feed business for US$8.75 million;
ii) the new feed factory for US$5.5 million; and
iii) the land of which the new factory is being built, for US$1.75 million
The Disposal will include the current assets and liabilities
directly related with the trading operations but will not include
the legal entity, Fuss Feed (Weifang) Co., Ltd, nor any fixed
assets of the existing company.
The Buyer has commenced due diligence and will complete this
exercise by no later than 30 July 2012 in order to proceed. In the
event that the Buyer decides to terminate without adequate cause,
US$1.0 million will be paid to the Company as a forfeiture fee.
The transaction will be completed in milestones and the Company
expects the first payment of US$4.5 million no later than 30 July
2012. The timing of the remaining payments is subject to other
milestones, including the completion of the land sale and the
completion of the new factory, but it is expected that US$3.5
million will be paid in autumn 2012 and the remaining US$8.0
million will be paid by the end of the year. The Disposal is
expected to result in a one-off gain of approximately GBP4.8
million.
The Directors would like to advise shareholders that there are a
number of conditions which will need to be satisfied pursuant to
the Disposal, which include:
-- Completion of satisfactory due diligence by 30 July 2012;
-- Completion of the new feed factory by 31 December 2012;
-- Existing animal feed business trading to plan; and
-- Receipt of all the necessary government consents and approvals.
The purchase agreement contains a number of warranties to be
provided by Fuss Feed and certain guarantees in respect of trading
outcome for the current year and the quantum of net assets. If the
factory is not completed by 31 December 2012, Fuss Feed will not be
entitled to the final US$8.0 million until it is rectified. In the
event that the completion of the factory is delayed and Wisehand
has not consented, Fuss Feed will also be liable to pay damages of
up to US$0.3 million per month of delay.
John Mclean, Chairman of China Food, commented: "The Board is
pleased with the progress of the Disposal of the feed business at a
reasonable price despite the depressed stock markets. As a result
of the Disposal, the Company will be able to focus on its core
condiments business and the proceeds of the Disposal will be used
for working capital and restructuring the Group's lending
facilities."
- Ends -
For further information:
China Food Company Plc
John McLean, Non-Executive Chairman Tel: +44 (0) 7768 031
454
Raphael Tham Wai Mun, Chief Executive
www.chinafoodcompany.com
Numis
David Poutney - Head of Corporate Tel: +44 (0) 20 7260
Broking 1000
finnCap (Nomad)
Geoff Nash / Ben Thompson (Corporate Tel: +44 (0) 20 7220
Finance) 0500
Simon Starr (Broking)
Media enquiries:
Abchurch Communications
Joanne Shears / Oliver Baxendale Tel: +44 (0) 20 7398
7709
joanne.shears@abchurch-group.com www.abchurch-group.com
Notes to Editors:
China Food Company, based in Shandong province in the People's
Republic of China, a region with a population of circa 95 million,
operates a group of well-established food manufacturing businesses
producing a range of cooking and dipping sauces. China Food has a
very strong brand for cooking and dipping sauces which are sold
through a network of distributors and outlets of supermarket chains
such as Tesco, Wal Mart, Carrefour and Jialejia in Shandong and
surrounding provinces in Northern China. China Food is expected to
benefit also from the growth of international supermarket chains in
China. The Group recently launched 'Xaka', its premium soya sauce
product, which has been well received by the market.
The Chinese sauces, dressings and condiments market is growing
significantly, driven by Chinese population growth and economic
prosperity. The Chinese domestic market is rapidly expanding, and
the Group is well positioned to benefit from China's demographic
growth and increased urbanisation, having invested in a new factory
which increases China Food's capacity to 50,000 tonnes of soya
sauce using processes which comply with domestic and international
manufacturing and food safety standards. The Group's strategy is to
become a leader in premium soya sauce in Northern China and to
capitalise on the rapid growth in the increasingly discerning
consumer market.
The Group's operations are highly scalable and able to support
further growth, and with net assets of GBP39 million (as at 31
December 2011), the prospects for China Food are strong.
Further information on China Food Company can be found at
www.chinafoodcompany.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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