Food Empire Holdings will receive a capital injection of US$40.0 million ($52.20 million) through a partnership with Asean-focused private equity fund manager Ikhlas Capital.
According to an Aug 20 announcement, the capital injection is expected to drive capital expenditure and mergers and acquisitions in Southeast Asia and South Asia, which will enable Food Empire to accelerate its plans for these regions.
In 1HFY2024 ended June 30, revenue from Food Empire’s Southeast Asia and South Asia segments surged 34.8% and 36.0% y-o-y respectively, and management expects this growth momentum to continue into the second half of the year.
The capital injection will be by way of an issuance of redeemable exchangeable notes (RENs). Both parties had signed a non-binding term sheet in June. Food Empire has inked note subscription agreements with Ikhlas Capital for the issuance of five-year RENs at 5.5% annual interest valued at US$40.0 million in aggregate.
The RENs will be issued by a special purpose vehicle (SPV) that will be incorporated and wholly owned by the group. The SPV will hold, or possess the option to hold, a portfolio of business operations, including the group’s business in Southeast Asia and South Asia.
The RENs are exchangeable into new ordinary shares in the capital of Food Empire at an exchange price of $1.09 per share at any time 24 months after the closing date up to the maturity date or convertible into new ordinary shares in the capital of the SPV.
See also: Nazir Razak's Ikhlas Capital investing up to US$40 million in Food Empire
The closing date is 21 business days from the satisfaction of conditions, and the maturity date is five years from the closing date.
Net proceeds from the transaction will be allocated for future expansion plans and investments.
Food Empire CEO Sudeep Nair says: “Food Empire brings to the table a strong record in managing emerging markets in extreme volatility. We are backed by eight world class facilities and a pipeline of new capacity expansion projects that will support our next phase of growth.”
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He adds: “Beyond the injection of funds, Ikhlas Capital is a strong strategic partner whose interests are aligned with ours. As an Asean-focused fund with a dynamic network of investors and regional expertise, they are the best partners to support us as we shift our focus to Southeast Asia and South Asia. We are confident that with our combined efforts, we will be able to unlock Food Empire’s real value for shareholders.”
Kenny Kim, CEO of Ikhlas Capital, says: “We are thrilled to partner with Food Empire Holdings F03 , a prominent Southeast Asian company with a robust portfolio and leading market share across its core markets. We believe that we can support Food Empire’s growth in its most dynamic and fastest growing regions, further strengthening the Group's market leadership and driving sustainable long-term success.”
Kim was previously CIMB group CFO. Ikhlas Capital’s founding partners include Nazir Razak, former CIMB chairman; Gita Wirjawan, who was formerly Indonesia's minister of trade; and Cesar Purisima, who was formerly secretary of finance for the Philippines.
Shares in Food Empire closed 1 cents higher, or 1.04% up, at 97 cents on Aug 20.
