Monde Nissin to buy 15% stake in Figaro
Figaro Coffee Group [FCG 0.9 5.6%] [link] announced that Monde Nissin [MONDE 13.9 2.5%] will buy 820,268,295 primary shares of FCG, at a price of P1.00/share, for a total equity raise of P820 million.
MONDE’s CEO, Henry Soesanto, said that they’re looking to get “greater exposure to the food service sector”, because they “view as a potentially attractive avenue for further growth”, domestically and internationally.
Mr. Soesanto also said that MONDE, as a global company, could help FCG in the procurement of ingredients and supplies to support the accelerated growth of FCG’s brands, like Angel’s Pizza.
FCG’s owner, Jerry Liu, said that the deal will help FCG “solidify its position as a very strong and stable [food and beverage] company”.
MB BOTTOM-LINE
Let me start with this: I am not alleging that anyone specifically has done anything wrong or illegal here, but anyone following me on Twitter will know that I had a few problems with this deal yesterday, so let me summarize my objections and just get it off my chest.
My first problem is that, for all of Q4/22, FCG was a sleepy stock trading in the P0.50 to P0.60 range, with an average daily volume of around 4.8 million shares.
Then, starting on the first trading day of 2023, and on no news whatsoever, FCG started to miraculously climb from that P0.63/share level, all the way to P0.92/share on January 19, then settling down to around P0.89/share before yesterday’s announcement.
The massive pump was driven by an average daily volume of 50.6 million shares, which is more than 10x what it was doing through all of Q4. Interestingly, while the stock shot up over 40%, the voracious buyers suddenly lost their buying appetite as the price approached P1.00/share.
The buying didn’t come from any of the retail-heavy brokerages, like COL Financial [COL 3.1 1.9%], so it wasn’t everyday traders like you and me who were driving this increase.
How did the traders become so confident in FCG’s prospects all of a sudden, to the point where a day’s worth of Q4/22 trades were being executed every half hour, on average, for every trading day in January?
My second problem here is that, for MONDE shareholders, what does it say to your IPO investment that was made on the promise of increased SKUs and the proliferation of alternative proteins (Quorn) that MONDE feels the best way to deliver value is by investing in a pizza restaurant?
Granted, a company’s responsibility is to deliver value to shareholders, and there may be aspects to this deal that I’m not aware of yet that could have long-term value, whether that means some control over FCG (like a board seat?) or agreements for cross-marketing of MONDE products, like Quorn, in FCG outlets.
But absent those tangible things (and press release statements about maybe banding together to buy in bulk are not tangible), it feels like this investment sends a confusing message to MONDE shareholders about the profitability potential of MONDE’s existing segments.
Did MONDE’s management look at the potential return of spending P820 million on itself and think, “dang, maybe buying a minority stake in a pizza chain for a hefty premium is the best move here?”
Maybe in a week or so I’ll be able to squint at this deal with fresh eyes and see the deal as a beautiful baby that was born under some truly ugly-looking circumstances, but I think my spirit is just triggered by having two of these deals (the Cemex [CHP 1.2 1.7%] thing yesterday, and now FCG), with what looks to be a huge amount of action motivated by non-public information, get announced on back-to-back days.
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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