Strategic Acquisition of Existing Shares of ... - Investor Relations

Strategic Acquisition of Existing Shares of Pakfood Plc. Creating Synergies
Dear shareholders, investors and analysts
I am writing to inform that the board of directors of Thai Union Frozen Products (TUF) has passed a resolution on
Dec 21, 2011 to purchase existing shares of Pakfood Public Company Limited (PPC) through a tender offer. The
board has also entered into a share purchase agreement with major shareholders of PPC to purchase the
company’s shares of not less than 40 percent. The total number of outstanding paid-up common shares of the
firm is 30 million.
The transaction / tender offer price will be the net book value per share of PPC’s audited consolidated financial
statements for the year ended 31 December 2011 which should be released on or before February 29, 2012.
However, the completion of the acquisition or the tender offer is also subject to satisfaction of conditions
precedent such as:
The meetings of the board of directors and/or the shareholders of PPC approve all matters as required under
transaction documents.
Legal, customs, tax and financial due diligence of PPC shall be completed at satisfaction
The tender offer is expected to start in March and it would take 25 business days to complete. The process should
therefore be completed within the second quarter of 2012. The tender offer will be fully paid in cash. The
financial adviser for TUF in this transaction is Asia Plus Public Company Limited.
Pakfood is one of the leading Thai frozen seafood processor and exporter with a strong focus in frozen shrimp,
pasteurized crab meat and ready-to-eat meals (chilled and frozen). Its main markets are the US, the EU and Japan.
It also owns a local brand “T Time” focusing on value-added food products, namely dim sum, in Thailand. During
the first 9 months of 2011, the firm generated sales of Bt 4,979 million with EBITDA of Bt 270 m and net profit of
Bt 112 million. As of September 30, 2011, its total assets were worth Bt 3,298 million.
Benefits of the Transaction
We recognize the strategic value of cooperation between the two leading seafood companies which both share
similar business in shrimp and value-added frozen food products. This alliance should allow more efficient raw
material sourcing, improved management of manufacturing capacities and more joint marketing efforts to
expand our local and overseas markets, such as the US and the EU which have been offering plenty of growth
opportunities. With PPC’s capability of value-added frozen seafood products, this partnership should lead to more
business opportunities as we can offer more variety of products to serve consumers’ needs.
We estimate that the typical annual shrimp procurement by both firms will collectively amount to almost 20% of
total Thai shrimp output per year, creating a crucial advantage for the alliance. In addition, as the local labor
supply continues to tighten, this alliance should also lead to more optimal capacity utilization at our processing
plants without unnecessary expansion. As a result of these, we expect better supply chain management that
should create more cost savings and further improve profitability for both firms.

We are generally optimistic about the outlook of frozen seafood business, particularly shrimp. With the respective
extensive market reach of TUF and PPC, this strengthened relationship should allow more exchange of market
intelligence and make possible more strategic moves or expansion together in the US and the EU markets.
The total amount of investment cannot be determined precisely at the moment as the offer price per share is
equal to the net book value per share of the audited PPC’s consolidated financial statements for the year 2011
ended 31 December 2011. But as a reference, PPC’s net book value as of 30 September 2011 is Bt 863 million or
equivalent to Bt 28.77 per share. We consider net book value is an appropriate and fair approach to determine
the offer price for this transaction. We do believe that with this strategic relation, both companies should be able
to grow and enhance profitability of each other, creating higher value to our respective shareholders in the near
future.
After the successful purchase of the company’s existing shares, the earnings of PPC will be recognized in TUF’s
income statement by the equity method, given that TUF will hold not less than 40% of the total number of the
firm’s outstanding common shares, but also not more than the remaining shareholders who comprise the current
management team. After the tender offer, the existing major shareholders should remain the largest shareholder
group of PPC, followed by TUF, and continue to manage the business.
The share acquisition will be paid in full by cash which will be funded by the internally generated cash flows of
TUF. The impact of the share acquisition on TUF’s financial position should be very limited, given that the size of
investment is considered insignificant compared with the value of TUF’s existing total assets of Bt 82,401 million
and total shareholders’ equity of Bt 25,222.7 million as of September 30, 2011.
With regards to TUF’s operating performance, the first 9 months of the year witnessed strong growth, particularly
in Q3, continually shattering records in sales, EBITDA and net profit. We therefore hold an optimistic view that
sales (up c. 40% YoY) , EBITDA and net profits should no doubt reach new highs this year, thanks to full
consolidation of MW Brands, continual revival of Thai shrimp export business and expansion of other existing
business. With sales of US$ 2,395 million and net profits of Bt 3,551 million, the first 9-month cumulative
performance this year has already exceeded that of the full year in 2010 where sales were US$ 2,268 million and
net profit of Bt 2,874 million. Besides the fact that the severe floods in the Central Region of Thailand have never
affected our business, performance in the last quarter of the year continues to be encouraging. We therefore look
forward to a record breaking year in terms of sales and net profit in 2011.
Yours sincerely,
Thiraphong Chansiri
President,
Thai Union Frozen Products Plc.