December 29, 2021
Ancom subsidiary to acquire 80% stake in Shennong Animal Health
Ancom Crop Care Sdn Bhd, the wholly owned subsidiary of Malaysia's Ancom Bhd, has entered into several share sale agreements to acquire a 80% stake each in Shennong Animal Health (Malaysia) Sdn Bhd and Vemedim Sdn Bhd for RM23.92 million (US$5.7 million) cash.
Shennong Group is principally involved in the manufacturing and trading of chemical and animal health products which encompass livestock-related antibiotics, feed additives, supplements and disinfectants mainly for the domestic market.
The proposed acquisition comes with a profit guarantee of RM4.6 million (US$1.1 million) in profit after tax a year for Shennong Group's financial years 2022 and 2023. The RM23.9 million valuation translates into a price-to-earnings multiple of 6.5 times based on the profit guarantee of RM4.6 million (US$1.1 million).
Ancom chief executive officer Lee Cheun Wei said the expansion of its market footprint in the agricultural chemicals space from its core plant-related chemicals to include livestock chemicals is in line with its goal to position Ancom as an integrated solutions provider in the food supply chain.
"As global economies cope with the rising inflation and food prices, we believe businesses that are critical in helping to sustain and secure supply of livestock, such as Shennong Group, are primed for growth. Locally, we are witnessing initiatives by the (Malaysian) government to improve the country's self-sufficiency level. Based on market research, Malaysia's animal health and nutrition market is poised to grow at a compounded annual growth rate of 4.3% between 2020 and 2025.
"Overall, the proposed acquisition is a synergistic move for us. As Shennong Group is also involved in the agricultural chemicals business, we see synergistic benefits where we could leverage on our distribution network to boost the market reach of our new addition. At the moment, Shennong Group is mainly serving the domestic market, but with Ancom's experience, resources as well as extensive geographical footprint in more than 40 countries, we are confident in elevating the new business to a higher level," Lee said.
- The Sun Daily