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Stock Commentary

Universal Robina buys Malaysian biscuit king 'Munchy’s'

Merkado Barkada
Universal Robina buys Malaysian biscuit king 'Munchyâs'

The stock was suspended on Friday after Universal Robina [URC 132.20 susp] announced that it had signed an agreement to acquire 100% of Munchy Food Industries [Munchy’s] from a private equity firm called CVC Capital Partners for P22.9 billion on a “cash-free, debt-free” basis. Munchy’s is Malaysia’s top biscuit manufacturer with “a wide variety of offerings across all key biscuit segments”.

In its press release, URC said that it would look to use the Munchy’s acquisition to increase the footprint of URC brands in Malaysia, and to use Munchy’s products to help URC “unlock growth synergies” in the ASEAN region. The parties expect the deal to close in December. The transaction triggered the PSE’s “Substantial Acquisition” rule, which caused the stock to be suspended for the full trading day on Friday. The suspension will be lifted this morning.

MB BOTTOM-LINE

Like Jollibee [JFC 243.80 0.65%], URC is looking to grow its international portfolio with an eye toward becoming more of a regional superpower. Moves like these can help reduce the risk of country-specific problems (whether political, medical, or climate-related) to the company’s bottom-line.

I’ve only been to Malaysia once, and when I was there I was sick as a dog so I don’t remember sampling any biscuits, but no doubt Munchy’s became #1 in Malaysia “across all key biscuit segments” for a reason: distribution channels. To me, that’s the key for a purchase like this. Yes, URC gets all of Munchy’s brands that it can continue to sell in Malaysia (and now across the SE Asian region), but the real benefit to URC would be in taking control of Munchy’s distribution system so that it can find new markets and expand old markets for its own URC brands.

As for the “cash-free, debt-free basis” line, that just means that by the time URC actually completes the purchase, the seller (CVC Capital Partners) will have already paid off all of Munchy’s debt and extracted all of Munchy’s cash. 

 

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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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