First Pacific is paying US$285 million for a 30 per cent stake in Indofood Sukses Makmur in a deal that will greatly relieve financial pressure on the Salim family, which controls both companies. The Hong Kong-listed conglomerate will join forces with Nissin Food Products of Japan to establish a 50-50 joint venture, which will acquire a 60 per cent interest in the Indonesian food processing and distribution group for US$570 million. This values Indofood at US$950 million, or 3,950 rupiah per share, equivalent to the closing price on Tuesday, when the deal was concluded. Analysts saw the deal as a means for the Salim family to pull money out of the crisis-ridden Indonesian economy while at the same time cashing in a large slice of their investment to fund debts in other areas of the family empire. Nissin Food will pay its share of US$285 million to the Salims in cash before February 1, when the transaction will be completed. First Pacific will fund its share through an issue to the Salims of US$135 million worth of new shares - 261 million new shares at HK$4 each - and pay US$150 million in cash to Salim. The news came less than three weeks after First Pacific paid US$749 million to acquire an effective 17.2 per cent interest in Philippine Long Distance Telephone. The Salims' interest in First Pacific will be increased to 58.1 per cent from 53.5 per cent after the sale. The family has appointed ING Barings to facilitate the 'orderly placement' of the new shares. The price of HK$4 per share represented a 7.2 per cent premium to the average closing price in the past 10 trading days. The deadline for First Pacific to pay the US$150 million cash element is June 30 next year, which can be extended to September 30. First Pacific executive director Thomas Yasuda rejected the suggestion that the deal was an attempt to bail out the Salim family. He believed the Indonesian Government would not impose 'draconian' measures against companies such as Indofood to counter their dominant market position which had been achieved through 'quality management'. There is deep concern in Indonesia that action will be taken against companies which had close political and business links with former president Suharto, who was pressured to quit in May. Indofood has been named as one of the targets of anti-monopoly legislation being drafted in Indonesia. Salim group chairman Liem Sioe Liong aligned himself with Suharto during his regime and claimed him as a life-long friend. Earlier this year, the Indonesian Government seized 10 per cent of Indofood from the Salim group after the country's central bank bailed out the family's Bank Central Asia. Indofood's share price sank to a low of 1,075 rupiah last March, but has recovered since September. First Pacific's executive vice-president for finance Michael Healy said: 'You have to look at the earnings potential. Based on the discounted cash flows and the evaluation of risk, we still think we got a good price.' He said after the acquisition but before the payment of the US$150 million in cash, First Pacific's net debt was US$530 million, equivalent to a gearing ratio of 50 per cent. Indofood recorded a US$7.6 million net profit for the first nine months to September, compared with a US$226 million loss last year.