KUALA LUMPUR (Feb 15): Farm Fresh Bhd has proposed to take up a 65% stake in ice cream chain The Inside Scoop Sdn Bhd (TISSB) for RM83.9 million.

The dairy producer said it will first acquire a 53% stake from the chain's existing shareholders for RM68.4 million. The shareholders are TISSB co-founder Edmund Tan Jun Hua (61% interest), Derrick Wu (37.9% interest) and Harsh Rajpal (1.1% interest).

Of this purchase price, RM48.4 million will be paid in cash, while the remaining RM20 million will be satisified via the issuance of 13.16 million new shares in Farm Fresh, at an issue price of RM1.52 apiece.

Subsequently, Farm Fresh will also ink a share subscription agreement with TISSB to acquire 12% of the enlarged issued TISSB shares for RM15.5 million.

TISSB will then become a 65%-owned subsidiary of Farm Fresh, with the remaining 35% interest held by Tan, said Farm Resh in a bourse filing.

It added that it will grant Tan the right to require the group to purchase the remaining TISSB shares held by him.  

In total, the cash portion amounts to RM63.91 million. Concurrent with the proposals, Farm Fresh said in a separate filing that it fund the deal by varying the utilisation of the proceeds from its initial public offering (IPO).

This comprises RM55.15 million originally earmarked for its production facility expansion in Australia, and another RM8.76 million as part of the funding to establish its new manufacturing hub, dairy farm and processing facility in Malaysia.

This as it sees the acquisition to be consistent with its future plans, and will pave the way to own “one of the fastest growing artisanal ice creameries and largest home-grown ice-cream chain in Malaysia”.

“Our board, after careful deliberation and taking into account the benefits and opportunities presented under the proposals, is of the view that it is in the best interest of our group to prioritise the proposals over the expansion of the production facility,” it added.

The acquisition, which is expected to be completed by the second quarter of this year, is subjected to approvals from Farm Fresh’s shareholders and Bursa Malaysia Securities.  

Shares in Farm Fresh closed unchanged at RM1.59, giving the group a market capitalisation of RM2.95 billion. Compared to its IPO price of RM1.35, it has gained 17.8%.