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News 1418 views last update:6 Aug 2012

CP Foods is aiming for global top three position

Charoen Pokphand Foods (CPF) said the acquisition of CP Pokphand Co (CPP) in Hong Kong is part of its strategy to become one of the world's top three animal-feed firms.

The acquisition will cost the equivalent of Bt66 billion (US$2.17 billion) to purchase a 74.18% stake from Orient Success International, Worth Access Trading and CPI Holding – three companies owned by the Cheravanont family under the Charoen Pokphand Group (CPG).
 
Adirek Sripratak, president and CEO of CPF, said the strategy was to encourage CPF to restructure its business in the region to achieve synergy, security and cost competitiveness.
 
"We intend to become one of the world's top three feed-meal producers. Now we rank as the sixth or seventh," Adirek said.
 
The deal will also help increase total CPF sales to Bt300 billion ($9.6b) next year from this year's estimated Bt210 billion ($6.7b).
 
Bargaining power
"CPF is to spearhead exploring business opportunities overseas by itself rather than relying on its subsidiaries. The strategy will strengthen the company's bargaining power with trading partners," Adirek said, adding that this restructuring was similar to what CPF did in 1999 to consolidate all related subsidiaries into branches of CPF.
 
He said the acquisition was predicted to generate 18% return of investment per year thanks to CPP, which manages business not only in China but CP Vietnam Corporation (CPV).
 
CPP's main business in China under the Chia Tai brand has focused on animal feed in 28 provinces, accounting for 95% of its total sales.
 
The deal will also support CPF's strategy of directly expanding business into both China and Vietnam. It will increase the contribution from its overseas business from 26% of total revenue to 50%.
 
Adirek added that the company had to lower this year's total sales target a little from Bt220 billion ($7.0b) to Bt210 billion ($6.7b) because of the flooding. However, sales are still set to grow by 10-15% next year.

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