Oriental Food buys long steel production facility for S$5mln

Ventures into industrial and construction materials industry being one of the high growth industries in China.

Oriental Food (Holdings) Ltd, one of the largest peanut products manufacturers in the People’s Republic of China (“PRC”), on Monday announced that it has entered into a conditional share sale and purchase agreement for the proposed acquisition of 100% equity interest in Jiangyin Dingsheng Jinshu Yayan Co., Ltd. (“Dingsheng”) from Li Yi (“Vendor”) at a cash consideration of RMB25.0 million (approximately S$5.0 million), according to an Oriental Food report.

Dingsheng, is located in Jiangyin City, Jiangsu Province, the PRC, and has the production facility for the manufacture and set up for the distribution of long steel products which is used in the manufacturing, construction and infrastructure industries.

Mr. Liou Fangyou, Executive Chairman of Oriental Food commented, “This acquisition signifies a new direction for the Group to diversify into an additional core business, beyond the manufacture of peanut products.”

“This new segment in industrial and construction materials, mainly providing value added services relating to, as well as the procurement and supply of industrial and construction materials, offers high growth potential given the vast and growing construction and infrastructure sectors in the PRC. The acquisition of an existing manufacturing facility allows the Group faster entry into this business segment.”

“At the same time, we will continue to pursue new avenues for growth to enhance sustainable, long-term shareholder value.”

The purchase consideration of RMB25.0 million, arrived at after arms’ length negotiations and based on a willing-buyer and willing-seller basis, takes into account the unaudited net tangible asset of Dingsheng.

This is intended to be financed through the proceeds from the recent placements and the Company’s internal resources.

The vendor of Dingsheng has granted the Company a put option allowing the Company to sell back Dingsheng for RMB30.0 million if Dingsheng’s audited net profit for the 12 months ending October 31, 2011 falls below RMB12.5 million; and at RMB36.0 million if Dingsheng’s audited net profit falls below RMB17.5 million for the 12 months ending October 31, 2012.