MANILA, Philippines - D&L Industries Inc., a manufacturer of customized food ingredients and specialty products, is offering to buy out other shareholders of Chemrez Technologies at a cost of P5.10 billion.
D&L Industries in a statement said it intends to acquire all the outstanding shares of Chemrez Technologies that it does not own for P6.00 per share through a public tender offer.
Chemrez, which is currently 34.7 percent owned by D&L, will become its wholly-owned subsidiary once the transaction pushes through.
“With the increasing success of Chemrez Technologies’ specialty chemicals businesses, both the existing and emerging, D&L Industries aims to maximize its participation and profit in these fast-growing markets through full ownership,” the listed manufacturer of customized food ingredients said.
With the transaction expected to close in the fourth quarter, D&L Industries said it would start to partially consolidate the financial results of Chemrez Technologies beginning fourth quarter of the year.
Full year consolidation will begin in 2015, the firm reported.
D&L Industries said the P6.00 per share offer price represents a 24 percent premium over the 60-day average price of Chemrez Technologies shares as of August 29 for valuation of P7.81 billion.
“After a careful assessment of how to maximize shareholder value, we believe this acquisition is the best move forward for D&L Industries, Chemrez Technologies and their respective shareholders,” D&L Industries executive vice president and chief financial officer Alvin Lao said.
“Apparently the reason why most acquisitions fail is that it is very difficult to ensure the two companies don’t have a culture clash that jettisons the deal. In this case, no such issue as both companies are managed by the same people and governed by shared values,” he said.
The acquisition is expected to be funded with the remaining P2 billion in cash from proceeds of D&L Industries’ initial public offering in December 2012 with the rest to be financed with debt and equity, Lao said.
D&L Industries said the company may consider delisting from the Philippine Stock Exchange if it no longer complies with the minimum public float after the tender offer.
Aside from broadening D&L’s portfolio, Lao said owning 100 percent of Chemrez would also strengthen the company’s cash generation capabilities as well as bolster growth as the specialty chemicals business continues to improve.
“Chemrez’s size in terms of revenues and market cap is not large enough to attract sufficient attention from investors, which resulted in lackluster trading.