Food & beverage SPAC Red Sena hopeful of securing qualifying acquisition

PETALING JAYA: Red Sena Bhd – the only special purpose acquisition company (SPAC) in the food & beverage industry – is hopeful of securing a qualifying acquisition (QA) despite growing scepticism in the market due to the less-than-ideal conditions currently.
The company’s business development director Ian Yoong views the current market situation as an opportunity rather than a dampener in its quest for securing a QA in the branded packaged products sub-sector.
“Yes, in fact we view it as more of an opportunity.We find more companies coming into the market,” he told SunBiz.
He said some companies have been put into market for reasons such as succession problems and divestment of non-core assets.
Red Sena has been on a lookout domestically and regionally. Yoong said more companies are coming into the market, particularly in countries like Indonesia and Vietnam. It however finds Thailand and the Philippines as being less suitable for its quest.
“We realise that countries like Thailand and the Philippines are a bit difficult in terms of the deal flow. We find it easier in Malaysia, Vietnam, Singapore and Indonesia,” Yoong said.
According to Inter-Pacific Securities head of research Pong Teng Siew, most F&B and consumer products companies tend to be small in scale, while large and “typically successful” ones are not likely to be put on the market.
“F&B and consumer types of businesses tend to be cash generative businesses. It is going to be difficult to find one that is large enough, profitable enough and available for sale,” he told SunBiz, alluding to a “slow” F&B sector.
Pong said SPACs could benefit from amalgamating several smaller companies into one QA rather than looking for one particular company to fulfil that purpose.
“The chances for that one single company that will qualify as a QA might be difficult. It might be better if they can find an amalgamation of several companies in the sector that would meet their criteria,” he added.
A SPAC has three years to secure a QA. If a SPAC is unsuccessful in securing a QA, 92% of the proceeds inclusive of interest will be returned to investors.
For Red Sena, the deadline is Dec 9, 2018, being three years after its listing on Dec 10, 2015.
With the clock ticking, Yoong said Red Sena is optimistic in securing a QA.
The company, he added, is still looking at prospective candidates and “nothing is concrete yet and is still at the early stages”.
Red Sena raised RM400 million through the issuance of 800 million shares in its initial public offering. Of that, 92% or RM368 million has been put into a cash trust account, as required of SPACs.
Red Sena is the fifth SPAC on the local bourse. The local SPAC domain consists predominantly of oil and gas companies, with the likes of Hibiscus Petroleum Bhd, CLIQ Energy Bhd, Sona Petroleum Bhd and Reach Energy Bhd.