Itochu links with CP Pokphand in cross-share deal for Asia push
Itochu, Japan's third-largest trading company, has agreed to a business tie-up with Thai agricultural group Charoen Pokphand as they seek to expand food supply in Asia.
Itochu, Japan's third-largest trading company, has agreed to a business tie-up with Thai agricultural group Charoen Pokphand as they seek to expand food supply in Asia.
Itochu will buy a HK$6.6 billion stake in Hong Kong-based unit CP Pokphand and the Thai company will take 102.4 billion yen (HK$7.8 billion) of Itochu's stock, the two companies said in separate statements. Itochu said it would also spend as much as 110 billion yen on a share buy-back over the next year.
The cross shareholdings would help the two companies boost sales, cut the cost of buying raw materials and reduce asset running costs, Tokyo-based Itochu said yesterday. The deal comes as rising disposable incomes across Asia attract global players to the local food industry.
Investing in CP Pokphand, which has a market value of US$3 billion and produces animal feed in China and owns farms in Vietnam, will also help Itochu push to boost earnings outside of so-called hard raw materials, such as the mining and trading of iron ore and coal amid sliding prices. Last year, Itochu bought Dole Food's Asian fruit and vegetable business and global canned foods unit for US$1.3 billion.
At the same time, the Japanese firm would help bolster CP Pokhphand's financial position and add its food marketing and distribution network in China, said Naree Apisawaittkan, an analyst at Phillip Securities. "CP Pokphand is trying to expand into food products such as meat and ready-to-eat meals from animal feeds," Naree said.
Itochu is adding to a food empire that already boasts convenience store operator FamilyMart, cooking oil maker Fuji Oil and wholesaler Nippon Access as well as joint investments with Chinese processed food manufacturer Ting Hsin.
Food accounted for 50.8 billion yen, or 22 per cent of Itochu's net income last financial year. Three years earlier, it gained 13 per cent of its earnings from food.
The alliance could expand to chemicals, information technology and finance, Itochu said.
