Listed chemicals and food raw materials firm D&L Industries Inc. is set to consolidate its businesses after acquiring full ownership of chemical unit Chemrez Technologies Inc. with a projected acquisition cost of P7.81 billion.
D&L, which currently owns 34.7 percent interest in Chemrez, said in a statement that it
will expand its business portfolio by acquiring the rest of the 65.3 percent Chemrez stake to complete its takeover.
The company said that the acquisition will be done via a public tender offer to be completed in the fourth quarter, costing P7.81 billion priced at P5.1 per share.|
The payment of the acquisition will be sourced from the remaining P2 billion cash from the proceeds of the 2012 initial public offering.
“This transaction intends to make Chemrez Technologies a wholly-owned subsidiary of the company,” D&L said.
“After a successful tender offer, the company will start to consolidate the financial results of Chemrez Technologies beginning in the fourth quarter of 2014. Full year consolidation will begin in 2015,” it added.
D&L Industries Executive Vice President and Chief Financial Officer Alvin Lao said that the Chemrez Technologies takeover is in line with the company’s target to raise its market capitalization to $1 billion in the next two years, from the current $800 million market capitalization.
Lao, who is also Chemrez Technologies’ treasurer and chief financial officer, said that “Chemrez’s size in terms of revenues and market capitalization is not large enough to attract sufficient attention from investors, which resulted in lackluster trading. This stock market mispricing of Chemrez presents an opportunity on which we can further our billion dollar market cap aspiration.”
“Owning 100 percent of Chemrez broadens our portfolio, strengthens our capabilities, including cash generation, and bolsters growth as the specialty chemicals business continues to improve,” he said.
“Apparently the reason why most acquisitions fail is it is very difficult to ensure that the two companies involved don’t have a culture clash that jettisons the deal. In this case, no such issue ensues as both companies are managed by the same people and governed by shared values,” he added.
Chemrez Technologies is a listed manufacturer of resins, oleochemicals, and specialty products, and has experiences in technologies including: colorants, polymers, biopetroleum, oleochemicals, powder coating, food, oil and gas, and water treatment.
D&L’s first half net income grew by 22 percent to P799 million from P655 million, while revenues went up 26 percent to P6.225 billion in the same period from P4.939 billion last year.
Established in 1963 and listed in December 2012, D&L has four main businesses: food raw materials (OFI), plastics (D&L Polymer and Colours Inc. and First in Colours Inc.), aerosols (Aero-Pack Industries Inc.), and chemicals (Chemrez Technologies).