As per the notice to exchange, Sunridge Foods, a wholly owned subsidiary of Unity Foods (UNITY) has decided to make an offer for purchase 100% shareholding of Uni Food Industries Limited (UFIL) at a total transaction value of Rs1.2bn.

UniFood Industries Limited (UFIL) is a consortium/Joint Venture between Habib Sugar Mills Limited (HABSM), Faran Sugar Mills Limited (FRSM) and Mehran Sugar Mills Limited (MRNS) having stake of 41%, 35% and 24%, respectively. UFIL owns a bakery and confectionary brand named “Good Goodies Cakes”. 

As per the latest accounts, FRSM and MRNS have taken full impairment against their UFIL investment whereas HABSM has still ~Rs127mn on its books under UFIL investment. However, the above-mentioned transaction could result in a one-off gain (net of any current liabilities) for the selling parties.

FRSM is anticipated to record a one off gain of close to Rs282mn (~Rs11/share) whereas HABSM and MRNS are expected to get an inflow of ~Rs209mn (~Rs1/share) and ~Rs195mn (~Rs3/share), respectively.

In case of UNITY, the company has ~Rs10bn lying in cash & short term investments as per their latest financials. Hence, generating funds for the transaction for the company will not be a concern.  

UniFood has been in losses so initially the company may have to absorb the losses in the short term but in the longer run, we believe this acquisition will help the company to enter into value-added business and sell in both local & international markets.

Courtesy – Topline Securities