Diamond Cold Storage Indonesia in talks with investors to sell 25% stake

27 May 2019 - 04:48 am UTC

by Elizabeth Brahmana in Jakarta; Riddhima Saxena, Kainoa Blaisdell & Lizzie Ko in Singapore

Diamond Cold Storage Indonesia (Diamond), a private Indonesian producer of milk and processed milk consumer products, is in talks with investors to sell an approximate 25% stake in the company, said seven sources familiar with the matter.

 

Despite the company's preference for strategic investors, it still saw strong interest from private equity players, the first four sources noted. Diamond is healthy and a good operating target so it will not have difficulty attracting suitors, they said, with the first two sources adding that this was the reason it attracted early interest from private equity players.

 

The first and the seventh source noted that Diamond has an EBITDA of around USD 40m.

 

The deal could fetch up to USD 150m, three sources noted.

 

The company has appointed Rothschild as its financial advisor, said two sources. The process kicked off around three months ago, added the first source.

 

Warburg Pincus and Temasek are said to have made the shortlist, three sources said. Blackstone was also noted to have made a bid for Diamond, the first source said.

 

Final round bids are expected to be due in June, three sources said. The deadline for the first round was around two weeks ago, the second source said.

 

Food and beverage (F&B) related deals in Southeast Asia usually progress quickly due to sizable interest, hence, sale processes normally have only two rounds, according the second source.

 

Diamond, which is famous for its ice cream that bears the same name, wants a strategic partner to support and help grow the business for the long term, noted the first source adding the company could easily raise debt if it only needed funding so is looking for more than just capital.

 

An eighth source added that by bringing on a strategic investor, Diamond could more effectively defend its market share and bring knowledge for further expansion. Diamond also has an extensive cold storage supply chain network, aside from its dairy products business that makes it very attractive to suitors.

 

The Indonesian cold storage supply chain network in is a concentrated market, led by Diamond Cold Storage, Maersk Line, Wahana and GAC, according to market research firm Ken Research.

 

Several F&B companies have built competitive cold storage and cold temperature supply chains to ensure their products are protected. The most notable companies are Diamond Cold Storage, Unilever Indonesia, Bonekom Servistama Compindo (BOSCO), and Gunung Sewu Group, as per an EU-Indonesia Business Network report in 2016.

 

Diamond is 100% owned by Norman Chen and his family, the first and second source said.

 

Diamond did not respond to email requests for comment. Rothschild declined to comment.

 

Warburg Pincus, Temasek, and Blackstone did not respond to email requests for comment.

 

Diamond produces a wide range of dairy and beverage consumer products including milk, juice, cheese, chocolate, yogurt, dressing, ice cream and other food related products, as per the company website. It has a consumer goods distributor and logistics subsidiary, Sukanda Djaya, that was founded in 1974 by Norman Chen’s father, WT Chen along with its partners, according to Sukanda Djaya's website.

 

Diamond Cold Storage was founded as a PMA (Penanaman Modal Asing), a foreign investment company, by three partners. WT Chen was the local partner, with Cold Storage Company of Singapore and Amatil Australia (now Amatil Coca Cola) as the foreign partners. Five years after founding WT Chen took the company over. Diamond established its own refrigerated distribution network then expanded into the food service and general consumer goods trading segment. The company also services international franchises in Indonesia such as McDonalds, the EU-Indonesia Business report highlighted.

 

There are several Chinese and Japanese companies that are also interested in acquiring Sukanda Djaya, the third source said. Diamond, however, has been unwilling to let it go, the third source added.

 

Sukanda Djaya is one of Indonesia’s largest refrigerated food and beverage distribution companies. It is a distributor of many foreign and house name brands, including McCain Food French Fries, and F&B products, as well as specialty F&B equipment in the hospitality, restaurant and café (HORECA) industries. It also imports products from Japan, Italy, US, France, Australia, New Zealand, and Norway, its website said.