Possible LBO for Singapore Food

Sponsors are circling another LBO in Singapore, this time for Singapore Food Industries. The target is the largest integrated food company in the city state. Trade sponsors stand the best chance of succeeding in the buyout. Financial sponsors would be dependent on leverage, which is becoming hard to find.

SFI is on the block with its majority shareholder Ambrosia exploring options to sell its 70.4% stake. Ambrosia is a wholly owned subsidiary of Singapore Technologies, which in turn is held by Temasek. There should be sufficient local interest in SFI to ensure that the selldown happens.

The 35-year-old company has core businesses of food preparation and distribution, and is an operator of abattoirs and hog auctions. Its Farmpride and Taj Foods brands include ready-to-eat foods that are exported to Australia, Japan and the UK. SFI has overseas operations in UK and elsewhere in Europe which constitute about 60% of SFI’s consolidated revenues.

Clearly, the reach and variety offered by SFI in the food industry would fill the missing links of SATS (Singapore Airport Terminal Services), which is primarily an investment holding company. Its subsidiaries are mainly involved in providing services such as freight handling, inflight catering and airline laundry to Singapore’s Changi Airport.

Although these are early days for the LBO, many believe SFI would draw at least a handful of local suitors because of the handsome cashflows from its five-year military contracts, which were recently renewed.

Even foreign players and private equity companies may be interested in the firm’s overseas operations. However, SFI’s military connections and its dominance of the domestic market may force Temasek to view the asset as strategically significant to Singapore, ruling out an offshore sale.