Lao-led D&L Industries to buy out Chemrez shareholders

MANILA, Philippines – Publicly listed D&L Industries wants to buy out minority shareholders of affiliate Chemrez Technologies, also publicly owned, “to maximize its participation and profit” in the company.

In a statement, D&L – owned by Dean Lao, one of the wealthiest Filipinos – has offered to acquire shares of Chemrez it does not own valued at P5.1 billion or P6 apiece through a tender offer. The price represents a 24% premium over the 60-day average price of Chemrez in the market as of Friday.

D&L Industries is engaged in product customization and specialization for the food, plastics, and aerosol industries. The company’s principal business activities include manufacturing of customized food ingredients, specialty raw materials for plastics, and oleochemicals for personal and home care use.

Chemrez, which is 34.7% owned by D&L Industries, is the country’s leading manufacturer of oleochemicals, resins and specialty chemical products.

“Chemrez’s size in terms of revenues and market cap is not large enough to attract sufficient attention from investors, which resulted in lackluster trading. This stock market mispricing of Chemrez presents an opportunity on which we can further our billion dollar market cap aspiration,” said Alvin Lao, D&L Industries EVP and CFO.

“Owning 100% of Chemrez broadens our portfolio, strengthens our capabilities, including cash generation, and bolsters growth as the specialty chemicals business continues to improve,” Lao, also Chemrez’s Treasurer and CFO, added.

Upon a successful tender offer, D&L Industries will start to consolidate beginning fourth quarter the financial results of Chemrez that are expected to be accretive to earnings in the same period. Full-year consolidation will begin in 2015.

D&L Industries will have 12% of Chemrez’s workforce, consisting of food technologits, chemists, and engineers focusing on research and development.

D&L Industries will finance the acquisition using the remaining P2 billion proceeds from its initial public offering in 2012, and debt and equity. The transaction is expected to close in the last quarter.

The company said it might delist Chemrez from the Philippine Stock Exchange if it no longer complies with the minimum public float requirement after the tender offer. Further announcements will be made as soon as new information becomes available.   

In the first half of 2014, Chemrez’s revenues rose by an annual 29% to P2.72 billion, net income by 45% to P207 million, and gross profit margin improved by 1.3 percentage points. – Rappler.com