KUALA LUMPUR (March 22): The high valuation expectations among those involved in the food & beverage (F&B) industry is one of the main challenges that special-purpose acquisition (SPAC) company, Red Sena Bhd, is facing in its acquisition of qualifying asset (QA), which is required to be completed by end of the year.

The firm’s executive director and chief executive officer (CEO), Joseph Tan Eng Guan, told the media after its annual general meeting (AGM) here today that the main challenges in the company’s efforts so far remain the valuation expectations, especially for those in the overseas market.

“Over the last 27 months, we realised that there are also not many F&B companies available for sale in the overseas market, mainly Thailand, Indonesia and Vietnam. In the case of Indonesia and Vietnam, in fact, the kind of valuation expectation is even higher than that in Malaysia.

“In the case of Thailand and Vietnam, there are also many investors and potential buyers looking out for investment, and that’s the reason why the valuation there is even higher than here,” Tan said.

With high valuation and the less familiar background in the overseas countries as compared with Malaysia, Tan highlighted that overseas opportunities have more or less fizzled out and the focus should be on the Malaysian market.

However, despite talking to more than 50 companies, Tan said no proposal has yet to materialise into anything concrete, as seen by the lack of announcement on the conditional purchase agreements.

“We have talked to not less than 50 companies and some of these companies have given the proposals. At this point, we have not received anything concrete… At this moment, we don’t really have many hot prospects,” he added.

On the number of shortlisted companies, Tan said there were only a handful at the moment.

When reporters asked if Munchy Group is one of them as it was reported by one of the local media that Red Sena is eyeing a takeover of the Munchy Group, Tan responded by saying nothing concrete had developed at the moment.

He also explained that the management has approached all F&B businesses it views as fulfilling all criteria of the SPAC. 

While time is running short for the management to acquire its QA, Tan said the management will not draw the last curtain until at least by the third quarter of this year.

“The final curtain is not drawn. By third quarter, if we have not come out with any conditional SPA, I think we’ll be out of time (to acquire QA),” Tan noted.

Nonetheless, he said management will not rush for QA that is not value accretive to investors and that it would be better for the capital to be returned to investors if the right opportunity, timing and price do not emerge.

According to him, there is still 48.8 sen per share in the trust account with another RM15 million (1.5 sen per share) outside the trust account, which investors could expect to receive if the QA did not materialise by end of the year.

As of writing, Red Sena is trading at 46.5 sen per share, giving it a market capitalisation of RM470 million.