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IFC invests Rs. 2.5 b in Cargills Foods for 8% stake in share capital

8/26/2014 12:00:00 AM   

Cargills (Ceylon) PLC has entered into an agreement with the International Finance Corporation (IFC) for an equity investment of Rs. 2.5 billion into its retail branch, Cargills Foods Company (CFC), the group said in a stock market filing yesterday. IFC will invest Rs. 2.5 billion ($ 20 million) to subscribe for an 8% stake in the share capital of CFC. The IFC investment was based on a pre-money equity valuation of Rs. 29,325 million for CFC as at the date of subscription and translates into a post-money valuation of Rs. 31,875 m for the retail company only.

The rest of the Group operations such as the FMCG sector including the dairy sector (Magic and Kotmale), meat processing (Goldi, Sams and Finest sausages, meat balls, etc.), agri-processing (Kist Nectars, jams, sauces, etc.) and Restaurants (KFC and TGI Fridays) as well as investments in banking and property continue under the holding company Cargills Ceylon PLC. According to the company’s Annual Report, the move comes as part of the restructuring exercise rolled out during 2013/14. Last year the Group embarked on a restructuring process with a view to establish business specific companies and strengthen the efforts of the management to optimise resources and expertise as well as create opportunities for value creation including attracting direct capital to the Group.

In the year ended, Cargills received shareholder approval for its proposed restructuring exercise as a major transaction under the Companies Act No. 7 of 2007. The Retail operations that were partly under the Company were thereafter carried out by a wholly owned subsidiary Cargills Foods Company Ltd. with effect from 1 October 2013.

The above process of restructuring and consolidation would result in the development of focused management and teams for each sector of operation, increased efficiency in the deployment of capital, reduction of Group debt and a resulting strengthening of the balance sheet. Having attracted the IFC investment into its Retail sector, Cargills would look to open up opportunities for a wider group of stakeholders to enjoy the dividends of the Retail company’s long term growth prospects.