SFI – BT

SATS shareholders okay SFI takover

General offer for all SFI shares triggered, lifting total bill to $509 million

MINORITY shareholders of Singapore Airport Terminal Services (SATS) have given their company the nod to buy a controlling stake in Singapore Food Industries (SFI) from Temasek Holdings.

Almost 70 per cent of minority votes cast at a meeting yesterday were in favour of SATS buying 359.7 million SFI ordinary shares equivalent to a 69.6 per cent stake. The offer price is 93 cents a share – a total of $334.5 million.

The move will trigger a general offer for all 157.1 million SFI shares, which could lift the total bill to $509 million. SATS chief executive Clement Woon said SFI shareholders will get the offer document within two weeks.

‘We only needed 50 per cent plus one vote to get this through, but what we got is overwhelming support,’ he said. ‘There is still a lot of work to do. We will move ahead with the general offer first, then start work on our integration plan.’

SATS’ controlling shareholder Singapore Airlines, with a stake of just over 80 per cent, abstained from yesterday’s vote, leaving minorities to decide.

SATS needs to secure at least 90 per cent of SFI’s shares to de-list the food company and 100 per cent for total control.

What if it does not get beyond 90 per cent? ‘We are not a financial investor,’ said Mr Woon. ‘We are in this for the synergy – to bring two companies together to create value for shareholders. Of course, we’d like a complete takeover.’ He declined to say how SFI, especially its leadership structure, will be restructured after the takeover. ‘We’ll work with the board and management when the time comes.’

SFI has appointed ANZ Singapore its independent financial adviser to counsel directors on the offer.

About 600 SATS minority shareholders voted on the takeover at a 9.30am meeting at the Hyatt Hotel yesterday. Those against the deal said the price is too high and the timing is bad.

At 93 cents a share, SATS is buying SFI at a historical price/earnings multiple of 15 times and a price/book ratio of 3.2 times. Also, the acquisition comes as the UK market – which accounts for more than two-thirds of SFI’s revenue – faces a nasty and drawn-out recession.

But according to Mr Woon, a premium must be paid for control. And as for timing, he said: ‘There is no better time. The probability of success of an acquisition is higher if it is done in a downturn.’

SATS believes that buying the region’s largest integrated food supplier will help it achieve sustainable growth powered by the twin engines of airport operations and food services. It also points out that SFI is a stable business with Singapore government contracts, such as supplying food to the armed forces, and access to the national food security programme.

Additionally, through SFI’s presence in Europe and the UK, SATS sees potential to expand into European airline catering. SFI’s UK business has been growing 14-19 per cent a year.

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