This article first appeared in The Edge Financial Daily on December 13, 2017 - December 19, 2017

OldTown Bhd
(Dec 12, RM3.08)
Accept offer with an unchanged target price of RM3.15: OldTown Bhd has received a pre-conditional cash offer for its shares by Jacobs Douwe Egberts Holdings Asia NL BV (JDE Asia). The offer price of RM3.18 per share represents a 10.4% premium to the last closing price at RM2.88 and amounts to a total cash consideration of RM1.47billion. 51.45% of the group’s stakeholders have agreed to accept the abovementioned offer.

JDE Asia is a privately owned company incorporated in the Netherlands, which has a global coffee and tea business. Going forward, JDE Asia aims to delist OldTown and privatise the group to enable better management flexibility. In relation to this, OldTown would make an announcement in the event that JDE Asia receives acceptances resulting in its ownership of 90% or more in OldTown. Upon which, the trading of the shares will be suspended immediately for five market days from that trading date. Subsequently, JDE Asia would commence the delisting process of OldTown.

JDE Asia is required to fulfil the following pre-conditions: i) acceptance by the Competition Commission of Singapore (CCS) and the CCS having issued a decision allowing the consummation of the offer without conditions or on conditions reasonably satisfactory to JDE Asia, and ii) making the necessary applications and attaining clearances from relevant antitrust authorities. Note that these terms have to be satisfied by the stop-date of Aug 11, 2018.

We are positive about the news, as it demonstrates the growing brand equity of the home-grown “OldTown” brand in the global food-and-beverage scene. The group has in the past year expanded its cafe chain outlets into Myanmar, Indonesia and to re-establish its presence in China. On the manufacturing business, the group’s instant-coffee-powder mix saw strong reception in the export markets (particularly in the Greater China region) to overtake domestic sales contributions. With the added connections made available by JDE Asia, the group’s internationalisation could be further accelerated. However, this would render investment opportunity in OldTown out of the public’s reach. Post announcement, we make no changes to our earnings estimates. — Kenanga research, Dec 12