Cargill is buying an 85% stake in Sorini Agro Asia Corporindo, an Indonesian producer of sorbitol, for an equity value of Rp2.7 billion ($301 million). AKR Corporindo and UOB Kay Hian, which own a combined 85% of Sorini, have struck an agreement to sell their shares to Cargill.
AKR is the largest private distributor of basic chemicals and non-subsidised petroleum products in Indonesia. Through its 68% ownership of Sorini in Indonesia and another subsidiary, Khalista Liuzhou Chemical Industries in China, AKR is one of the largest producers of sorbitol and starch sweeteners in Asia-Pacific. The divestment of Sorini is intended to allow AKR to enhance focus on its energy, chemical distribution and logistics infrastructure businesses, said sources.
UOB Kay Hian is a broker that acquired a 17% stake in Sorini in 2007 when one of the large shareholders exited.
The deal for 85% has been struck at a price of Rp3,500 per share. Cargill will also make a tender offer to Sorini's minority shareholders for the 15% free-float at the same price. The deal is subject to approval from AKR shareholders at a general meeting, which will be held in January next year.
Sorini, which was founded in 1983, is today one of the world's leading producers and suppliers of sorbitol. It operates seven manufacturing facilities located in Indonesia's East Java and Lampung provinces. Sorini's product range comprises starch and starch derivative products, all used in the production of consumer goods such as food and beverages, cosmetics and personal care, and pharmaceuticals. Sorini supplies its products to customers in over 70 countries, including Nestle, Procter & Gamble, and Unilever.
Sorini’s share price gained Rp75 yesterday to close at Rp3,350, breaching its earlier 52-week high of Rp3,300, as shareholders got wind of the transaction. The shares have traded as low as Rp1,460 in the past year, and have moved from Rp2,900 at the beginning of December. The deal has been struck at a modest premium of around 8% to yesterday’s closing price.
For the 12-month period ended September 30, Sorini registered revenues of $188.6 million and posted an Ebitda of $26.4 million. Revenues grew from $163.2 million the previous year, but the Ebitda shrank from $35.8 million, largely due to fluctuations in tapioca prices.
Sorini’s current management team is a key part of the deal, said sources. Kanwarlal Motilal Chopra, who has been chief executive officer of Sorini since 2006 when he joined from Indo Bharat Rayon, and Dhoka Sunit Kumar, who has been finance director since 2007, will both be joining Cargill.
"This acquisition will be an anchor point for future growth of our food ingredients business in Asia, particularly in Indonesia and Southeast Asia," said Bram Klaeijsen, president and regional director of Cargill Asia-Pacific. "Through this acquisition we will gain manufacturing and supply capabilities in Indonesia, which will enable us to better serve customers in Indonesia as well as in other Asian and global export markets."
Cargill has been doing business in Indonesia since 1974 and currently has over 8,000 employees on the ground. It also has offices, manufacturing plants and facilities throughout the country.
The deal was another opportunity for Swiss banks to consolidate their position in Indonesia, with Cargill represented by Credit Suisse and UBS working with AKR.
