Indonesia's 
Indofood, one of the world's biggest instant noodle makers, has launched a takeover offer for China Minzhong that values the food producer at S$734 million ($575 million), just days after an attack by a short-seller eroded almost half of the Chinese firm's market value.
Indofood Sukses Makmur Tbk PT (INDF.JK), the top shareholder in Singapore-listed China Minzhong Food Corp Ltd (CMFC.SI), said it had increased its stake to 33.49 percent after buying additional shares from the market at S$1.12 per share, which kicked off a mandatory offer for the remaining shares at the same price. The agreement to buy the shares it does not own would cost Indofood $382 million.
The deal comes after Minzhong's stock market value plunged to $273 million last week following a 49-page report by California-based Glaucus Research on accounting issues at the company. Minzhong has rejected any irregularities.
In a similar move last year, Singapore state investor Temasek Holdings Pte Ltd raised its stake in commodities firm Olam International Ltd (OLAM.SI) after short-seller Muddy Waters questioned Olam's business practices, highlighting how large shareholders can take advantage in a time of crisis.
Indofood and Minzhong could benefit from the closer cooperation, analysts said.
"I think Indofood sees some form of synergistic value because Minzhong is more in the upstream raw materials business and Indofood makes noodles," Roger Tan, CEO of Voyage Research in Singapore, said ahead of Indofood's announcement.
Shares in Minzhong, which had been suspended since the selloff last week, more than doubled to match the offer price of S$1.12 after trading resumed on Monday. Indofood's shares fell 9 percent.
Indofood, controlled by Indonesia's wealthy Salim family, has made some big acquisitions in the agribusiness sector in the past few years.
Indofood doubled its stake in Minzhong in March when it bought shares from Singapore sovereign wealth fund GIC for S$1.12 a share. Minzhong was listed in 2010.
Under Singapore law, a single shareholder needs to make a mandatory takeover offer for the target company if its stake increases to 30 percent.
Strong Defence
The report by Glaucus was the first attack by a short-seller on a Singapore-listed Chinese firm, although in recent years short-sellers have targeted Chinese companies listed in Hong Kong, Canada and the United States, citing irregularities.
On Sunday, Minzhong issued a strong defense of its business in a 19-page statement, saying it had completed its review of the report released by Glaucus and strongly rejected what it viewed as "reckless opinions" and "inferences" drawn by the short-seller.
"We reiterate that most of the issues raised by Glaucus with regard to the financials of the company arose out of a complete lack of understanding of the way we conduct our business as well as the operating environment in the People's Republic of China," it said.
Minzhong said it had not fabricated its sales or accounts as alleged by Glaucus. In its defense, Minzhong showed tax filings, and said it had documents and photographs to confirm capital expenditures.
Glaucus stood by its report on Monday.
"After needing a full week to prepare answers to the most basic questions about its business, we believe that Minzhong's response is not only inadequate, but that it also raises a host of additional red flags which further corroborate our underlying thesis," Glaucus said in a statement.
Indofood, one of the world's biggest instant noodle makers, has launched a takeover offer for China Minzhong that values the food producer at S$734 million ($575 million), just days after an attack by a short-seller eroded almost half of the Chinese firm's market value.Indofood Sukses Makmur Tbk PT (INDF.JK), the top shareholder in Singapore-listed China Minzhong Food Corp Ltd (CMFC.SI), said it had increased its stake to 33.49 percent after buying additional shares from the market at S$1.12 per share, which kicked off a mandatory offer for the remaining shares at the same price. The agreement to buy the shares it does not own would cost Indofood $382 million.
The deal comes after Minzhong's stock market value plunged to $273 million last week following a 49-page report by California-based Glaucus Research on accounting issues at the company. Minzhong has rejected any irregularities.
In a similar move last year, Singapore state investor Temasek Holdings Pte Ltd raised its stake in commodities firm Olam International Ltd (OLAM.SI) after short-seller Muddy Waters questioned Olam's business practices, highlighting how large shareholders can take advantage in a time of crisis.
Indofood and Minzhong could benefit from the closer cooperation, analysts said.
"I think Indofood sees some form of synergistic value because Minzhong is more in the upstream raw materials business and Indofood makes noodles," Roger Tan, CEO of Voyage Research in Singapore, said ahead of Indofood's announcement.
Shares in Minzhong, which had been suspended since the selloff last week, more than doubled to match the offer price of S$1.12 after trading resumed on Monday. Indofood's shares fell 9 percent.
Indofood, controlled by Indonesia's wealthy Salim family, has made some big acquisitions in the agribusiness sector in the past few years.
Indofood doubled its stake in Minzhong in March when it bought shares from Singapore sovereign wealth fund GIC for S$1.12 a share. Minzhong was listed in 2010.
Under Singapore law, a single shareholder needs to make a mandatory takeover offer for the target company if its stake increases to 30 percent.
Strong Defence
The report by Glaucus was the first attack by a short-seller on a Singapore-listed Chinese firm, although in recent years short-sellers have targeted Chinese companies listed in Hong Kong, Canada and the United States, citing irregularities.
On Sunday, Minzhong issued a strong defense of its business in a 19-page statement, saying it had completed its review of the report released by Glaucus and strongly rejected what it viewed as "reckless opinions" and "inferences" drawn by the short-seller.
"We reiterate that most of the issues raised by Glaucus with regard to the financials of the company arose out of a complete lack of understanding of the way we conduct our business as well as the operating environment in the People's Republic of China," it said.
Minzhong said it had not fabricated its sales or accounts as alleged by Glaucus. In its defense, Minzhong showed tax filings, and said it had documents and photographs to confirm capital expenditures.
Glaucus stood by its report on Monday.
"After needing a full week to prepare answers to the most basic questions about its business, we believe that Minzhong's response is not only inadequate, but that it also raises a host of additional red flags which further corroborate our underlying thesis," Glaucus said in a statement.
