China Minzhong

China Minzhong: Indofood Sukses Makmur (ISM) has bought GIC’s entire 14% stake in China Minzhong, via a married deal at $1.12/sh. This follows the placement of 98m new shares in Minzhong at $0.915/sh in mid-Feb. Post transactions, the top three sh/h in Minzhong are, ISM (29%), Templeton (11%) and CMIA (5%). The Salim Group (the parent company of Indofood) is not uninitiated with such M&A, having acquired 6 Chinese consumer goods companies back in 2004-06. Minzhong is a much bigger company compared to the past acquisitions, and ISM’s investment in Minzhong is also much bigger than its previous deals, likely reflecting ISM’s eagerness to secure raw material supply. Key catalysts for Minzhong include, - substantial potential revenue which ISM can bring to Minzhong - potential offer for Minzhong by ISM, if it wants to have absolute control - removal of share overhang, now that two out of three pre-IPO investors (GIC and Olympus Capital) have exited, leaving only CMIA’s 32m shares. Maybank KE maintains Buy with TP $1.36.