This article first appeared in The Edge Financial Daily, on April 20, 2016.

KUALA LUMPUR: Several parties, including Kumpulan Wang Persaraan (Diperbadankan) (KWAP), have expressed interest in Can-One Bhd’s subsidiary, F&B Nutrition Sdn Bhd, which manufactures sweetened creamers and condensed filled milk, the company announced to Bursa Malaysia. 

The announcement came hard on the heels of the cancellation of  Aspire Insight Sdn Bhd’s RM1.47 billion offer to buy out the aluminium can manufacturing business owned by Can-One’s associate company, Kian Joo Can Factory Bhd. 

Can-One, however, clarified in the announcement that “no formal proposal or offer in respect of F&B has been received from any party as at to date”. 

Nonetheless, KWAP revealed to the media that the pension fund is in the final stage of the acquisition of a 30% stake in F&B. The price tag was said to be at RM280 million, valuing the manufacturer at RM933.33 million — an amount that would raise eyebrows. 

F&B is a core subsidiary of Can-One, besides Kian Joo. In the financial year ended Dec 31, 2015 (FY15), F&B contributed revenue of RM564.97 million, or 63.7%, of Can-One’s revenue.

Can-One’s food products segment achieved a pre-tax profit of RM59.86 million in FY15. On a back-of-the-envelope calculation, the acquisition price of RM280 million for a 30% stake would translate into almost 21 times the condensed milk manufacturer’s net earnings based on a corporate tax rate of 25%.

To recap, Can-One bought into F&B in November 2006. Its wholly-owned subsidiary Amber Alliance Sdn Bhd subscribed for eight million new shares of RM1 each at par for cash, representing an 80% equity stake in F&B.

Nearly eight years later, on June 13, 2014, Can-One entered into a conditional share sale agreement to buy the remaining 20% stake, or three million shares, in F&B from Teh Khoy Gen for RM112.9 million. The purchase consideration was settled through the issue of 39.75 million Can-One shares at RM2.84 each to Teh.

The new Can-One shares issued represent approximately 20.69% of the company’s issued share capital then.

It is worth noting that the acquisition price of RM112.9 million paid by Can-One at that time valued F&B at RM564.5 million for the entire equity interest, which was about 16 times the FY14 earnings of RM36.11 million.

However, some quarters opined that the divestment is to raise fresh funds for Can-One to pare the whopping borrowings that it has resumed to acquire a 32.5% stake in Kian Joo. 

As at Dec 31, 2015, Can-One’s total debts stood at RM542.6 million, of which RM270.5 million were short-term borrowings. The company incurred interest expenses of RM20.99 million for FY15, compared with an operating profit of RM76.8 million.  

The offer from Aspire would have enabled Can-One to pocket RM477 million cash with the 32.5% stake in Kian Joo. 

Aspire is a joint venture between the Employees Provident Fund and Can-One former chief operating officer Chee Khay Leong. Kian Joo announced last  Friday that the takeover offer by Aspire, which was made in November 2013, was off as both parties failed to come to an agreement on the takeover price.