This article first appeared in The Edge Malaysia Weekly on June 13, 2022 - June 19, 2022

CONFECTIONERY tycoon Liew Fook Meng must have bittersweet feelings over the privatisation offer for Cocoaland Holdings Bhd, which he and his brothers founded about 40 years ago and which is worth nearly RM700 million today.

On June 3, Main Market-listed Fraser & Neave Holdings Bhd (F&N) — the second largest shareholder of Cocoaland, with a 27.66% stake — proposed to privatise the Rawang-based snack and candy maker at RM1.50 per share.

F&N, controlled by Singapore-listed Fraser & Neave Ltd, has proposed to acquire the remaining 72.34% stake in Cocoaland for RM488.15 million cash in a deal that values the candy maker at RM686.4 million.

The Liew family, the single largest shareholder of Cocoaland, with a 40.65% stake, is supportive of the privatisation and committed to selling its lion’s share to F&N.

“We don’t foresee any major uncertainty over this privatisation deal. We have signed an irrevocable and unconditional undertaking agreement with F&N that we are fully supportive of its privatisation offer. In short, there won’t be any bidding war,” Liew tells The Edge in an exclusive interview.

“For now, as far as the Liew family is concerned, we want this privatisation offer to go through, and we want our stake to be sold to F&N; that’s very clear. We will not entertain any offer other than F&N’s; that’s our stance at this point in time. If we are indecisive and still considering other offers, this share sale will never end.”

In the days before they established Cocoaland, the Liew brothers were small-time vendors for Apollo Food Holdings Bhd, Oriental Food Industries Holdings Bhd and Mamee-Double Decker (M) Sdn Bhd. At one point, they sold deep-fried snacks and banana fritters by the roadside in the Klang Valley.

Early success came in the mid-1980s when the Liew brothers identified a market opportunity for the manufacture of polytubed drinks, which enabled them to venture into the overseas market for the first time by exporting to the Middle East.

But the real breakthrough came in the late 1980s, when the brothers purchased their own factory to produce “Koko Jelly”, a chocolate snack product that was so successful and profitable that it provided them with enough capital to expand.

“My brothers and I started Cocoaland with only one intention — to make ends meet. We never dreamt about being rich, and I never imagined Cocoaland would become a public-listed company worth close to RM700 million,” Liew says, still somewhat surprised at how big the company has grown.

Officially incorporated in 2000, Cocoaland was listed on the Second Board of Bursa Malaysia in 2005, before transferring to the Main Market a year later.

Today, the group is one of the country’s largest manufacturers of sugar confectionery products, such as fruit gummies, candies, chocolate, wafers and snacks. Its products are exported to Southeast Asia, the Middle East, East Asia, North America and Europe.

“Cocoaland is our life’s work. We put in our blood, sweat and tears to make candies and grow this company. But there is no room for sentiment in business. We need to learn to let go at the right price at the right time,” Liew says.

“To me, it’s been an amazing and satisfactory corporate journey for Cocoaland, and it would be a perfect ending for us if we could sell it to F&N, as the company will be in good hands.”

Fraser & Neave is ultimately owned by Chinese-Thai business magnate Tan Sri Charoen Sirivadhanabhakdi via his beer and liquor giant Thai Beverage PCL.

“From our perspective, F&N is a perfect suitor to take over Cocoaland. F&N has been a great business partner and strategic investor of Cocoaland over the past 10 years or so. It has two board representatives in Cocoaland, and they are quite familiar with our business operations,” Liew says.

Initially, he says, there were two buyout giants — one from Europe, another from Asia — that wanted to acquire his family’s controlling stake in Cocoaland.

“They had verbally expressed their interest to take over Cocoaland, but we never received a formal offer letter from them. At the same time, we [the Liew family] also discussed with F&N the possibility of buying out Cocoaland.

“My brothers and I are not young any­more; some of us have to retire and rest because of health problems. So, we informed F&N about our intention to exit. Eventually, F&N came back and told us it was keen to take up our stake. More importantly, it was the only one that gave us a formal offer letter.”

In 2010, F&N had taken up a 23% stake in Cocoaland for about RM55 million via a private placement, when the former had just lost the Coca-Cola bottling and distribution business. Today, 12 years later, that 23% stake is worth RM157 million.

“It was a wonderful investment for them because our share value has easily tripled since then. Back then, Cocoaland had been focusing on only the food industry, whereas F&N is very strong in the beverage sector,” says Liew, noting that the two companies complement each other.

Liew says the privatisation offer by F&N is the best the Liew family has received in recent years.

“The offer price of RM1.50 values Cocoaland at a price-earnings ratio of about 30 times. We had a 1-for-1 bonus issue last year. First Pacific Co Ltd offered us RM2.70 per share in 2015. If we use the pre-bonus issue share base as a benchmark, F&N is essentially offering us RM3 per share now,” he points out.

Although Cocoaland’s earnings have declined in recent years because of the challenging business environment, the company continued to expand its operations.

“In the long run, we believe Cocoaland is still earnings-accretive for F&N. I can’t speak on behalf of F&N, why they want to privatise Cocoaland, but I would say that one of the unique propositions for us is that we are very strong in the gummy and candy segment,” says Liew.

He points to Cocoaland’s LOT100 Fruity Gummy, which is the market leader in this space, far ahead of the competition because of the high barriers to entry and capital-­intensive nature.

Liew observes that many people are also unaware of another aspect of Cocoaland’s operations — it is a contract manufacturer of health supplements for local and foreign pharmaceutical companies.

“This segment contributes about 20% of Cocoaland’s revenue and profit, and this could be a reason that F&N is interested in taking over Cocoaland.”

In 2015, suitors knocked on Cocoaland’s door, not once or twice, but thrice. In April that year, the company entered into preliminary talks with Swedish private equity group EQT Partners to dispose of a controlling stake, though no firm offers were disclosed.

On the heels of the EQT discussions, Cocoaland received a takeover offer amounting to RM377.52 million, or RM2.20 per share, from Navis Asia V11 Management Co Ltd in May. Deeming the offer too low, the board decided to reject it.

A month later, Cocoaland received yet another takeover offer — from Hong Kong-listed First Pacific to acquire its entire business for RM2.70 per share, or RM463.32 million in cash.

The Liew family was ready to cash out to First Pacific, which is controlled by Chinese-Indonesian tycoon Anthoni Salim — also known as Liem Hong Sien — of the Salim Group. To the surprise of many, however, the deal was called off in July.

“It was no secret that we intended to let go of our stake in Cocoaland. We have been very open about it. I have stated before that we do not intend to pass this business on to our next generation because we have many siblings, which means too many children,” says Liew.

“We have 12 siblings, including nine brothers, of whom seven, including myself, are still working in Cocoaland. Including the second and third generations, we have a rather big family with more than 90 family members. Succession planning is a problem for us. To me, family always comes first, and family harmony is very important. I don’t want to see any tussle and feud among family members.”

Having worked hard all his life, Liew does not plan to fully retire.

“I am 74 now but, frankly, I will miss going to work every day,” he says.

Under the arrangement with F&N, three of the seven brothers in Cocoaland will leave the company and four, including Liew, will stay on for at least six months after the privatisation is completed.

“If we assume the deal is to be completed by the end of this year, we might stay on until June next year,” says Liew, whose family will pocket RM274 million from the sale.

“If good opportunities arise, we might invest in other companies and businesses, be they listed or non-listed, and F&B- or non-F&B-related.”

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