Indofood to sell Bogasari milling business; Salim family to divest its majority stake

by Teresa Acklin
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   JAKARTA, INDONESIA — P.T. Indofood Sukses Makmur, the world's largest instant noodle manufacturer and owner of Bogasari Flour Mills, in late December announced that it would sell Bogasari and that several foreign investors had shown an interest in acquiring the mill, although participation by domestic investors was not ruled out.

   Bogasari not only is Indonesia's largest flour producer, but also is one of the largest in the world. Its two flour mills in Jakarta and Surabaya, with combined daily milling capacity of 16,000 tonnes, wheat equivalent, account for 73% of Indonesia's total annual milling capacity.

   Eva Ryanti, Indofood's chief executive officer, told the Jakarta Post that the sale of the wheat flour subsidiary would be used to repay debt, of which the company has an estimated U.S.$1 billion.

   A week earlier, Indofood announced that First Pacific Co. of Hong Kong entered a 50-50 partnership with Nissin Food Products Co., Japan's leading instant noodle maker, to acquire a 60% stake in Indofood for U.S.$570 million.

   Indofood is controlled by the Salim family of Indonesia, which holds 62.7% of the company's shares. The transaction will be completed at 3,950 rupiahs (U.S.49c) per share, up sharply from the recent low of R1,625. The price would be below the R4,650 prevailing at the beginning of 1997, not long after shares began trading actively.

   Under the agreement, signed Dec. 16 in Tokyo, the Salim family and associates will transfer a 60% interest in Indofood to a newly formed company and will sell half of the venture's shares to First Pacific and the other half to Nissin Food. Because First Pacific is 53.5% held by the Salim family, its purchase of Indofood shares is considered a “connected-party transaction” by the Stock Exchange of Hong Kong. As such, approval of the transaction by minority shareholders is required by the exchange.

   The remaining 2.7% of the Salim family's shares will go to the Indonesian government. The Salim group owes R48 trillion to the government, or about a third of the R141 trillion in emergency credits extended to the country's ailing banks.

   Indofood has a commanding market presence in Indonesia's instant-noodle market with a share in excess of 90%. The company also is a leader in edible oils, margarine and shortening products in Indonesia. Its snack-foods business, a joint venture with PepsiCo, Inc., commands a 70%.