KUALA LUMPUR (March 24): Minority shareholders of Nestlé (Malaysia) Bhd have been advised by KAF Investment Bank Bhd (KAF IB) to vote in favour of the resolution pertaining to its acquisition of Wyeth Nutrition (Malaysia) Sdn Bhd (Wyeth Malaysia) from Wyeth (Hong Kong) Holding Co Ltd (Wyeth HK) for RM165 million to be tabled at the forthcoming extraordinary general meeting at end-April.

In an independent advice circular filed with Bursa Malaysia on Friday (March 24), independent adviser KAF IB is of the view that the proposed acquisition is "fair and reasonable" and is not detrimental to the non-interested shareholders.

KAF IB said the proposed acquisition is fair given the fact that the purchase consideration is within the range of Wyeth Malaysia's implied equity valuation of between RM140.3 million and RM175.3 million based on the price-to-earnings (P/E) multiples of the selected comparable companies of 8.3 times and 10.4 times.

It also noted that the purchase consideration is lower than RM167.8 million and RM204.2 million based on the enterprise value to the earnings before interest, taxes, depreciation and amortisation (EV/EBITDA) multiples of the selected comparable companies of 6.6 times and 8.3 times. The transaction is also between RM157.8 million and RM186 million based on the mid-point of the P/E multiple and the mid-point of the EV/EBITDA multiple of the selected comparable companies.

The adviser also viewed the proposed acquisition as reasonable given that it is a strategic fit and an expansion of Nestlé Malaysia’s business in the nutrition category.

"There is a potential of resource sharing between both companies due to the complementary nature of the operations of Nestlé Malaysia Group and Wyeth Malaysia. Wyeth Malaysia is potentially extending its know-how to other businesses in Nestlé Malaysia Group and the synergies between Nestlé Malaysia Group and Wyeth Malaysia is expected to accelerate growth prospects of Nestlé Malaysia," said KAF IB.

In February, Nestlé Malaysia's wholly-owned subsidiary Nestlé Products Sdn Bhd had entered into a conditional share purchase agreement with Wyeth HK for the proposed acquisition. Wyeth Malaysia distributes premium nutritional products under S-26, S-26 Gold, Ascenda, Promama and Enercal Plus brands.

Nestlé Malaysia had said then that the acquisition marks its aim to solidify its footprint in the premium infant and adult nutrition segments.

The proposed acquisition is deemed a related party transaction in view of Société des Produits Nestlé SA’s (SPN) direct interest and Nestlé SA’s indirect interest in Nestlé Malaysia via SPN. Wyeth Hong Kong is a wholly-owned subsidiary of Nestlé SA.

Barring unforeseen circumstances, the proposed acquisition is expected to be completed by the second quarter of 2023.

Nestlé Malaysia shares closed up 10 sen or 0.07% at RM134.70, giving it a market capitalisation of RM31.59 billion.