Antitrust issues won’t stumble Oldtown deal

PETALING JAYA: The antitrust pre-condition is unlikely to derail the RM1.47 billion deal for Oldtown Bhd, AmInvestment Bank opined, citing Oldtown and Super Group’s combined white coffee market share in Singapore at 50%, which is below the 60% threshold for antitrust laws.

The stock jumped by 29 sen to hit a high of RM3.17 in morning trade before closing 20 sen or 6.94% higher to RM3.08 on some 3.73 million shares traded.

Dutch coffee company Jacobs Douwe Egberts Holdings Asia NL. B.V. (JDE), which has now made an offer for Oldtown, took Super Group private in late 2016.

Based on Nielsen’s data as of September 2017, OldTown (40%) and Super (10%) combined white coffee market share of Singapore amount to 50% .

“However, market share is not decisive and various factors such as competitors and barriers to entry are taken into consideration as well. While so, we think the pre-conditions are unlikely to be a stumbling block given the white coffee FMCG industry is highly competitive with low barriers to entry,” AmInvestment said in its note to investors today.

Analysts have recommended that shareholders of OldTown Bhd accept the takeover offer of RM3.18 per share in cash, which they consider to be at a premium to their valuations.

AmInvestment Bank has a “buy” recommendation on OldTown supported by its export-driven growth, market leader as the number one white coffee brand in all its core markets and outstanding operational track record.

“Seeing the offer price is close to our fair value, we ascribe for investors to accept the offer by JDE of RM3.18 per share,” the research house said in a report today.

It did however qualify that OldTown is on the brink of a re-rating beyond its price-to-earnings (PE) peg as its fast moving consumer goods (FMCG) makes consistent headway into China.

In terms of its comparables, AmInvestment Bank said OldTown’s local consumer peers and regional FMCG peers would further suggest that there may be upside to OldTown’s privatisation offer at 17.5 times its CY18 PE.

“OldTown’s F&B business has remained unexciting due to subdued consumer sentiment and tight competition, and a turnaround might require more time and/or investment,” RHB Research said in its note.

Meanwhile, it said the FMCG business could also face challenges moving forward. This is given the pressure of higher raw material prices, according to RHB.

AllianceDBS Research also deemed the offer price reasonable and fair.