July 20, 2012
China Food sells animal feed business to Wisehand Planning
An agreement for a total consideration of US$16 million has been entered between China Food Company (CFC) and Wisehand Planning, a Korean-owned investment holding company, to dispose of the group''s animal feed business.
The business, part of CFC''s wholly-owned subsidiary, Full Fortune Holdings, generated pre-tax profit of around GBP1.6 million (US$2.5 million) in 2011, meaning the total consideration represents an exit multiple in excess of six times post tax earnings.
Under the sale, the existing animal feed business will be sold for US$8.75 million, the new feed factory for US$5.5 million and the land on which a new factory is being built will trade hands at US$1.75 million.
The transaction is expected to be completed by July 30th, by which time the first payment of US$4.5 million is also due. The timing of the other payments is based on certain milestones. The disposal is expected to result in a one-off gain of around GBP4.8 million (US$7.5 million).
John Mclean, Chairman of
China Food, said: "The board is pleased with the progress of the disposal of the feed business at a reasonable price despite the depressed stock markets. As a result of the disposal, the company will be able to focus on its core condiments business and the proceeds of the disposal will be used for working capital and restructuring the group''s lending facilities."
The share price rose 4.17% to GBP0.25 (US$0.39) by 10:13.