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Seafood Processors: Strategic Cooperation

22 December 2011, at 12:00am

THAILAND - Thai Union Frozen Products Public Company Limited (TUF), a major player in processing and exporting frozen and canned seafood and Pakfood Public Company Limited (PPC), also a leading seafood processor and exporter, will be joining alliance to take on the local and world markets.

The time-tested track record and expertise of the two companies, if combined, should lead to more efficient raw material sourcing, improved management of their manufacturing capacities and more effective and comprehensive coverage of their export markets and end consumers. The new alliance would therefore offer great potential to increase their respective revenues and profits in the domestic and international markets.

Khun Thiraphong Chansiri, the president of TUF, said the business partnership between TUF and PPC would be a crucial step that could further enhance their strengths in the frozen food and ready meal sectors, especially in the export markets where there is a rising consumption trend of ready-to-eat food in Europe and the US.

The alliance will also make possible more varieties of food products to be offered to meet end consumers' needs. Moreover, TUF and PPC can exchange market information, allowing formulation of more effective marketing strategies in order to meet the demands of the world markets.

In addition, the procurement of raw materials will become more efficient after the strategic alliance when TUF and PPC plan to work together on sourcing and managing raw materials. The management anticipates that the combined demand of raw materials from TUF and PPC will allow more economies of scale, leading to better terms and conditions. In the long term, this strategic alliance should also help reduce costs and improve competitiveness.

TUF has signed a share purchase agreement with a group of existing shareholders. The acquisition is subject to satisfaction of conditions precedent as set out in the SPA. TUF will purchase PPC's common share in a tender offer and the total consideration will be paid in cash. After the transaction, TUF will hold shares in PPC not less than 40 per cent of total issued and paid-up shares. The purchase price will be equal to net book value per share of PPC's audited consolidated financial statements for the year ended 31 December 2011.

After the transaction, the sellers will remain the major shareholders of PPC holding a larger proportion of PPC's shares than that of TUF and will continue to manage the firm.

The process after the signing of the share purchase agreement will be the determination of the share purchase price which should take place in March 2012. After that, TUF will submit the tender offer. The transaction is expected to be completed within the second quarter of 2012.

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