Published March 3, 2009

SATS in position to take SFI private

It secures 91.5% of SFI shares; offer closes next Monday

By VEN SREENIVASAN

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SINGAPORE Airport Terminal Services (SATS) has accumulated enough shares in Singapore Food Industries (SFI) to de-list and privatise it.

Food giant: SFI is a stable business, with Singapore government contracts, such as supplying food to the armed forces, and access to the national food security programme

At the close of trading on Friday last week, SATS had accumulated 472.67 million of SFI's 516.79 million shares.

That translates to about 91.5 per cent - enough to go ahead with the de-listing and privatisation of Singapore's largest integrated food company.

SFI said that in accordance with Rule 1303(1) of the Singapore Exchange listing manual, it will be suspending trading of its shares after the close of the offer.

Based on SATS's offer price of 93 cents per SFI share, SATS would have spent $439.58 million on the takeover so far.

The development comes about a month after SATS's minority shareholders gave the company the nod to buy a controlling stake in SFI from Temasek Holdings.

Almost 70 per cent of minority votes cast at a meeting were in favour of SATS buying 359.7 million SFI ordinary shares, equivalent to a 69.6 per cent stake, for $334.5 million.

The move triggered a general offer for all 157.1 million outstanding SFI shares, which, when completed, will lift the total purchase price to $509 million.

With SATS now holding 91.5 per cent of SFI, the remaining minority shareholders with the other 8.5 per cent have - for all practical purposes - little choice but to cash out or face compulsory acquisition of their shares.

According to the SATS offer document, the offer remains open until 5.30pm next Monday.

At 93 cents a share, SATS is buying SFI at a historic price/earnings multiple of 15 times and a price/book ratio of 3.2 times - a point that has drawn criticism from some SATS shareholders who reckon the price is too high in current conditions.

But SATS chief executive Clement Woon believes that a premium has to be paid for total control.

SATS believes that buying the food supplier will help it achieve sustainable growth powered by the 'twin engines' of airport operations and food services.

It also points out that SFI is a stable business with Singapore government contracts, such as supplying food to the armed forces, and access to the national food security programme.

Also, through SFI's presence in Europe and the UK, SATS sees potential to expand into European airline catering. SFI's UK business has been growing at 14-19 per cent a year.

Observers believe that after the takeover, SATS will replace the senior management team of SFI with its own team.