CI Holdings shares rise to highest level in over a decade

PETALING JAYA: Shares of diversified company CI Holdings Bhd rose to their highest level in more than a decade yesterday on expectations that the speculated deal, where Japan's Asahi Group Holdings Ltd will buy CI Holdings' subsidiary Permanis Sdn Bhd, will be sealed soon.

Reliable sources said the deal was imminent. It had earlier been reported that Asahi was looking to pay around US$200mil (RM600mil) for Permanis, which is CI Holdings' main asset.

That price tag works out to RM4.23 per CI Holdings share.

CI Holdings shares ran to their highest level since Sept 2000 yesterday, settling at RM4.01, up 21 sen in a weak broader market. More than 1.2 million shares changed hands.

The management of both CI Holdings and Permanis were unavailable for comment with regards to the announcement of the speculated deal.

It had been previously speculated that Japanese beer maker Asahi which is on an aggressive overseas merger and acquisition trail in order to counter the effects of a slumping domestic economy - had been eyeing Permanis, a wholly-owned subsidiary of CI Holdings.

Under Permanis, CI Holdings owns the local PepsiCo franchise and enjoys a distribution network of more than 40,000 outlets nationwide.

Following the reports, CI Holdings commented that the price tag of US$200mil (RM600mil) did not reflect Permanis' value.

Permanis contributes up to 90% of CI Holdings' net profit with the remaining coming from its tap and sanitary ware segments.

Under an exclusive franchise, Permanis produces world renowned brands such as Pepsi, Mirinda, 7-Up, Gatorade, Lipton, Tropicana and Evervess.

Permanis also manufactures its own brands of drinks which include beverages under the trademarks of Chill, Excel, Frost, Bleu and Shot, it said on its webstite.

“We believe that CI Holdings may take a re-look at the deal if Asahi were to offer a higher price in view of the tougher operating environment going forward,” said OSK Research in a follow-up report on the purported deal.

That said, even if Asahi raises its price, CI Holdings may be at the losing end of the deal if it accepts the sale as CI Holdings would be selling its mainstay business, which has a very enviable position, some analysts point out.

For the third quarter of its financial year ending June 30, 2011, CI Holdings posted a net profit of RM8.2mil on the back of RM140.1mil revenue compared with a net profit of RM10.95mil on the back of RM137.7mil revenue in the same period last year.

“Assuming the sale of Permanis goes through, CI Holdings would be left with its tap and sanitary ware division and cash of RM600mil which it could then use to acquire another core business, or return to shareholders in the form or a special dividend or capital repayment,” RHB Research said in a note to clients.

Another analyst added that considering the cash flows and growth potential of Permanis, CI Holdings will be hard-pressed to acquire another similar business with the money it will get from selling Permanis.