Charoen Pokphand Foods Public Company Limited (CPF) stated that the Annual General Shareholders’ Meeting on October 27, 2020, approved the acquisition of swine business in China by a subsidiary which is considered as the acquisition of assets and connected transactions.
However, the acquisition of swine business in China by a subsidiary, which was approved by the shareholders’ meeting of the Company, must be approved by the shareholders’ meeting of C.P. Pokphand Co., Ltd. (CPP) in accordance with the conditions precedent for the transaction. The shareholders’ meeting of CPP will be held on November 2, 2020.
In September, CPF stated that the company would propose to its shareholders for approval for its subsidiary in China to acquire 43 companies in the swine business through the issuing of new shares as payment to the seller.
Chia Tai Investment Co., Ltd (CTI), which its main business involves feed manufacturing and distribution in China and also an indirect subsidiary of CPF via C.P. Pokphand Co., Ltd (CPP), a listed company in Hong Kong Stock Exchange. The proposal will facilitate the integration of its feed production in China with the swine business which is now managed by Chia Tai Animal Husbandry Investment (Beijing) Co., Ltd. (Seller), a subsidiary of Charoen Pokphand Group.
This proposed deal resulted in the acquisition of 43 companies of Chia Tai Animal Husbandry Investment (Beijing) worth 28.14 billion RMB (4.109 billion US dollars or 131.287 billion baht). CTI will issue new shares as payment to the seller without financial burdens.
CPF believed that entering into this business will create business opportunities for CTI by penetrating more swine business with high growth potential like China. It is also a vertical integration of CTI to achieve integrated swine business from feed, farm and slaughter, throughout processing. This strategy will encourage the company’s efficiency to serve well with market changes as well as to combine expertise in its value chain, which is the accomplishment of the business integration and more facilitate business expansion.
If successful, it will allow CTI to gain higher profits from the swine business expansion thanks to the lucrative pork price. Moreover, the deal will encourage the company to have higher efficiency cost and business management to benefit its further investment in the long run.