KUALA LUMPUR: Maybank Investment Bank views Farm Fresh Bhd's acquisition of The Inside Scoop Sdn Bhd (TISSB) as an earnings accretive acquisition and offers various positive business synergies across Farm Fresh's existing value chain and potential foray into the consumer packaged goods (CPG) ice cream market.
Farm Fresh entered into a share purchase agreement with Edmund Tan Jun Hua, Wu Chuang Yang (Derrick), and Harsh Rajpal to acquire a 53 per cent equity stake in TISSB for RM68.4 million.
The transaction will be done via RM48.4 million cash and the balance of RM20 million via the issuance of 13.2 million new Farm Fresh shares at RM1.52 each
Farm Fresh also entered into a share subscription agreement with TISSB for new TISSB shares representing a 12 per cent equity stake for RM15.5 million cash.
TISSB will become a 65 per cent-owned subsidiary of Farm fresh upon completion of the acquisition, which is targeted to be by the second quarter of this year.
"With retail ice creameries as a new revenue stream, this offers various business synergies to Farm Fresh in the form of product cross-selling opportunities, regional store expansions and wider product distribution network capabilities.
"As Farm Fresh has previously indicated its intention to penetrate the domestic CPG ice cream market once its new manufacturing hub in Bandar Enstek, Seremban is completed, TISSB's founders will also be key assets in leading Farm Fresh's ice cream division," it said.
Assuming TISSB's financial year 2022 (FY22) net profit of RM7.8 million sustained, Maybank IB said this acquisition could lift Farm Fresh's net profit by RM3.8 million per annum.
The firm maintained a 'Buy' call on the stock with a target price of RM1.75.