KUALA LUMPUR (July 31): Poultry producer CAB Cakaran Corp Bhd (KL:CAB) plans to buy commercial animal feed manufacturer Cargill Feed Sdn Bhd (CFSB) for RM231 million in cash. This move will help CAB Cakaran strengthen its poultry business by producing its own animal feed for over 100 broiler and breeder farms across Peninsular Malaysia.

CAB Cakaran said in a bourse filing on Thursday its unit CAB Cakaran Sdn Bhd (CABC) has signed a conditional share and purchase agreement (SPA) with Cargill Holdings (Malaysia) Sdn Bhd to buy 100% equity interest in CFSB.

The group plans to pay for the acquisition using RM23.1 million from its own funds and RM207.9 million in bank loans. By the end of March 2025, the group had RM84.67 million in cash and bank balances, and total borrowings of RM340.35 million, according to its latest financial report. The deal is expected to be completed by the fourth quarter of this year. 

CFSB makes animal feed for livestock and fish, with factories in Westports, Butterworth, Melaka, and Sabah, producing up to 400,000 tonnes a year. Its 51-owned subsidiary, Desa Cargill Sdn Bhd, also makes animal feed.

For the year ended May 31, 2025, CFSB earned RM390.96 million in revenue and RM22.75 million in profit before tax. Its profit margin improved to 21.05% due to lower ingredient costs and recovering bad debts.

Despite a declining revenue trend in recent years, CAB Cakaran, which also owns and operates the Kyros Kebab fast-food chain, said the acquisition brings strategic long-term value, especially as the group scales its feed demand.

“With such a broad farming footprint, securing a reliable and cost-effective supply of animal feed is vital to maintaining operational efficiency and supporting the group's long-term growth,” it said.

“By internalising feed manufacturing, the CAB group aims to improve feed quality consistency, reduce reliance on external suppliers, and mitigate risks related to raw material price fluctuations,” it noted.

The RM231 million price tag is based on an enterprise value of RM140 million and net cash of RM91 million, implying an enterprise value/earnings before interest, tax, depreciation and amortisation multiple of 4.93 times, lower than the industry average of 8.43 times.

CAB Cakaran also expects the acquisition to boost its earnings per share from 10.76 sen to 12.98 sen on a pro forma basis.

At the time of writing on Thursday, shares in CAB Cakaran were traded one sen or 1.48% higher at 68.5 sen, valuing the group at RM480.80 million. The counter has risen over 26% year-to-date.