URC acquires Australian snack company for AU$600M

Snack food maker Universal Robina Corp. (URC) has entered into an agreement to fully acquire Australia's Consolidated Snacks Pty. Ltd. (CSPL) for AU$600 million, one of the biggest acquisitions by a Filipino company.

The transaction is equivalent to P21.379 billion.

"The transaction has been approved by the Board of Directors of both companies and is expected to close by 30 September 2016 subject to the approval of the Australian Foreign Investment Review Board (FIRB) and fulfillment of customary closing conditions," URC said in a regulatory filing.

Under the agreement, URC acquiring 100 percent of the shares of CSPL, Australia's second-largest salty snacks company, for AU$600 million in a cash-free, debt-free deal.

CSPL trades under the company name Snackbrands Australia which has 30 percent market share with a portfolio of chips which includes Kettles, Thins, CC's, and Cheezels.

With the acquisition, URC said it plans to expand its footprint in Oceania.

“URC in the past three years has started to look for strategic options on acquisitions or partnerships given the emerging competitive challenges being brought upon by the lifting of trade barriers and the attractiveness of the region where we operate," URC CEO Lance Y. Gokongwei said.

This comes after the 2015 ASEAN integration which lowered tariffs, increased free trade agreements (FTAs), and smoothened customs procedures among member states.

"While we continue to push for innovation as an anchor to sustain our growth, the opportunity came at the right time to acquire a company like Snackbrands," Gokongwei said.

To accelerate business plans

SBA CEO Paul Musgrave said the partnership would be able to accelerate the business plans of both companies.

"It was clear that a regional partnership would accelerate our plans in both these areas and the approach by URC could not have been better timed," he said.

"We expect our acquisition by URC to benefit our employees, customers and suppliers and look forward to continued investment in manufacturing quality products here in Australia," he said.

Regina Capital Development Corp. Business Development head Luis Limlingan said it may take a while before URC reaps the benefits of the acquisition.

"I think the acquisition is in line with their strategy. Aside from expanding, they want to cut costs. There may be friction costs. It may take a while," he said in a phone interview.

It may some time for the companies to become integrated, Limlingan added.

Shares of URC are currently trading at P183.70 apiece from P184.00 at eh close of trading on Tuesday.

Limlingan said URC shares may bounce back to the P200-per-share level once it reaps the benefits from the acquisition.

Last year, Filipino firms acquired 10 foreign companies. The biggest was Emperador Inc.'s buyout of Beam Suntory's brandy and sherry business in Jerez for P13.8 billion in cash. — VDS, GMA News