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Denise Tsang

First Pacific will seek to buy 30 per cent of Indofood Sukses Makmur on its own after the collapse of a joint US$570 million takeover with Nissin Food Products of Japan.

 Opposition from a small number of Indofood's 70-strong bank creditors led to the deal's failure, First Pacific said yesterday.

 The SAR conglomerate had sought to buy 60 per cent of Jakarta-listed Indofood, the world's largest maker of instant noodles, with Nissin.

 The deal was originally supposed to have been completed on February 1, but was repeatedly held up pending the approval of creditors.

 First Pacific managing director Thomas Yasuda said First Pacific intended to acquire independently the 30 per cent attributable interest it had sought in Indofood and possibly extra shares in the company.

 He would not say if Nissin would also pursue its interest.

 The aborted deal, which saw First Pacific and Nissin set up a 50-50 joint-venture to buy a controlling stake in the company, required the unanimous approval of Indofood bank creditors.

 Analysts widely regarded the deal as an attempt to bail out Indonesia's Salim family, which has been hit hard by Indonesia's economic crisis.

 The family is the controlling shareholder of both companies, with a 62.66 per cent stake in Indofood and 53.5 per cent of First Pacific.

 Mr Yasuda said: 'I will categorically reject criticism of any continuous bailout actions. It's nonsense.

 'And the Salim family is well on its way to recovery.'  He said: 'We are disappointed the deal with Nissin can't go through. But we will pursue as vigorously as we can [the purchase of] the 30 per cent stake in Indofood because the company is very important to us.

 'It is also a key element in our restructuring programme during the last 18 months.'  He said 'a few' Indofood bank creditors, mostly syndicated ones, had refused to promise First Pacific not to recall loans at any time.

 The promise was a prerequisite for the takeover because the sharp rupiah depreciation had seen Indofood breach some of its US dollar-dominated loan agreements, which required it to maintain debt-to-equity ratios at certain levels.

 Mr Yasuda justified First Pacific's interest in Indofood.

 'It's a good company in terms of its cash flow, turnover and market capitalisation in spite of the worst economic crisis in Indonesia,' he said.

 'This is a company we couldn't have afforded to buy 18 months ago.'  First Pacific must seek minority shareholders' approval for any revised deal, although shareholders approved the previous Indofood deal.

 First Pacific said any plan to acquire shares beyond the original 30 per cent would be subject to contractual restraints.

 Indofood appears to have weathered Indonesia's recession and political turbulence, yesterday revealing a turnaround for last year.

 Net profit stood at 150 billion rupiah (about HK$135 million) last year against a 1.19 trillion rupiah net loss in 1997.

 The company's bottom-line performance could have been even better last year, had it not been troubled by substantial interest charges.

 It held 2.1 trillion rupiah in cash and cash deposits compared with bank loans of 8.5 trillion rupiah on December 31.

 Indofood said it planned to spin off its Bogasari Flour Mill unit 'into four separate business entities based on specific operations'.

 Indofood's market capitalisation amounted to US$1.25 billion based on Monday's closing price.

 An analyst at a European brokerage said he was negative about First Pacific's plan to invest in Indofood.

 'There is too much uncertainty about Indonesia and therefore Indofood,' he said.

 First Pacific shares dropped 1.53 per cent to HK$6.40 yesterday although the announcement that the deal had been aborted came after the market closed.



First Pacific in solo Indofood bid as Nissin deal scuppered