Etika to acquire Malaysian pasteurised milk manufacturer and distributor

S$38.5mln takeover of SLAJ and SLAM will enable Etika to expand to wider ready-to-drink dairy segment.

Etika International Holdings Limited (“Etika” or the “Group”) has entered into a conditional sale and purchase agreement for the proposed acquisition of 100% equity interest in Susu Lembu Asli (Johore) Sdn. Bhd. (“SLAJ”) and Susu Lembu Asli Marketing Sdn. Bhd. (“SLAM”) (SLAJ and SLAM are collectively referred to as the “Target Companies”) for a cash consideration of RM89.5 million (approximately S$38.5 million), according to an Etika announcement.

The Target Companies are principally engaged in the manufacture and distribution of pasteurised milk and other beverages in Malaysia. The Target Companies started operations more than 40 years ago as a small-scale fresh milk distributor with its activities mainly concentrated in the state of Negeri Sembilan. Their product offering has since grown to include full cream milk, low-fat milk, flavoured milk, soya milk and fruit juice drinks.

SLAJ's manufacturing facility is located on its leasehold land in Johor Bahru, measuring approximately 43,658 square feet with a factory built-up area of about 34,014 square feet. Other than manufacturing its halal-certified products, SLAJ is also a contract manufacturer for other FMCG companies. Its products are manufactured under strict hygienic state-of-art-processes technology and it has obtained the Hazard Analysis Critical Control Point (HACCP) certification for food safety practices.

SLAJ's products are currently distributed locally under brand names of “Goodday”, “Daily Fresh”, “Mr. Farmer“ and “Sky Fresh” to all major hypermarkets, supermarkets, dealers, wholesalers, on-premise outlets as well as restaurants in Peninsular Malaysia via SLAM where it enjoys a strong brand positioning. SLAM carries out its business activity on its own leasehold land of approximately 22,593 square feet with a warehouse and office built-up area of about 36,705 square feet in Petaling Jaya.

Etika's Group Chief Executive Officer, Dato' Kamal Tan said, “We expect this acquisition to be able to generate a new revenue stream for the Group which is essential for us to maintain the growth momentum of our Dairies Division. This will serve as a strategic platform for Etika to gain a foothold into the larger RTD dairy segment through a wider range of healthier product offerings under established brands which have gained wide market acceptance in Malaysia. The Group's Dairies Division made its first foray into the RTD segment via the new Joint Venture in New Zealand in March 2009 for UHT milk under PET Aseptic Bottling, followed by the introduction of Dairy Champ Milk + Juice drink late last year and the recently completed acquisition of UHT milk manufacturer in Vietnam. As such, this acquisition is in line with the natural evolution of our Dairies Division towards more modern and healthier products in meeting the ever changing needs of dairy consumers as the Malaysian economy progresses.”

Dato Kamal Tan further added, “We will also be able to reap synergistic benefits from the combined research and development efforts of the Target Companies and our Dairies Division to create quality healthy products to meet the demands of the increasingly competitive and discerning consumers. In addition, the sharing of “know-how‟ and good manufacturing practices will also result in a more cost efficient operation coupled with higher quality products.”

Upon completion of the acquisition, the Target Companies are expected to contribute positively to the earnings of the Group for FY2011.

The completion of the acquisition, amongst others, is subject to the approvals from the shareholders of Etika and Singapore Exchange Securities Trading Limited.