Super Group, Singapore's largest instant-coffee maker, is an attractive acquisition target for beverage companies eyeing a strong foothold in Asia's expanding instant-coffee market, according to a media report.
The maker of Super Coffee offers potential acquirers established brands and a Southeast Asian distribution network, brokerage firm UOB Kay Hian told Bloomberg.
As such, Japan's Kirin Holdings and Suntory Beverage & Food, which acquired America's Beam for $16bn this week, were both likely suitors. They may have to offer at least $2.2bn to convince the Singapore-listed firm's founders to sell.
Tokyo-based Kirin, Suntory or Asahi Group Holdings may have to table more than S$5 a share to either acquire or take control of the firm, said James Koh, a Singapore-based analyst at Maybank.
Super's founders may not accept an offer priced at S$5 a share because the stock traded close to that level in August 2013, said Andrew Chow, a Singapore-based analyst at UOB.
A S$5-a-share bid would value the firm at S$2.79bn ($2.2bn), or about 29 times analysts' average estimate for net income this year. The industry median worldwide is 16.
Super Eyes Acquisitions
Super's founders may be more likely to acquire rivals than sell their firm, said Alfie Yeo, a Singapore-based DBS analyst. Darren Teo, the head of corporate strategy and business development said last year Super could acquire coffee makers with reputable brands.
However, Super's ambitions are unlikely to deter potential bidders, looking to expand in the region, from targeting it, Chow added.
Southeast Asia's instant-coffee market is forecast to expand 38% from 2013 to about $4bn in 2017, according to Euromonitor International.
In a market dominated by Nestle, the demand for instant coffee in China is expected to shoot up by 52% between 2012 and 2017. Instant versions are likely to account for 98% of total China sales in 2017, Euromonitor data showed.
Super "will definitely be one of the biggest beneficiaries of the increasing consumption. The appeal here is you have a market leader in its space and you immediately get access to some very attractive markets," said Koh.
Super sells a variety of instant-coffee mixes and operates several factories across the region, according to its website.
Branded products make up about 65% of the 27-year-old company's revenue, while food ingredients account for the rest, according to Super's latest quarterly earnings update.
Super's shares finished 4.34% higher at S$3.85 in Singapore. The company's stock has rocketed some 890% over the past five years.
Chairman and managing director Teo Kee Bock, and two other founding directors controlled about 33% of the company as of March 2013, the company's 2012 annual report showed.