Kohlberg Kravis Roberts & Co (KKR.N) is in talks to buy Singapore-listed abalone farmer Oceanus Group (OCGL.SI) in a deal that may be worth around US$500 million ($613.6 million), three sources with direct knowledge of the matter told Reuters.
Oceanus stock, which was trading down 2%, turned positive to trade up as much as 14.6% after the Reuters report. Some 29.3 million shares changed hands, the highest volume since Jan. 17. The stock had its biggest one-day percentage gains since August 2010.
Private equity firm KKR has lined up financing of US$300-400 million from a group of banks, according to one of the sources.
The sources declined to be identified as the talks were confidential. KKR and Oceanus declined to comment.
Two of the sources said the take-private deal could ultimately see Oceanus relist in Hong Kong to unlock value in the stock.
The stock is down about 13% this year, hurt by poorer-than-expected results for 2010 and concerns that it will continue to see execution risks from the expansion of its restaurant business. Oceanus currently has a market value of about US$484 million.
Oceanus Group is a holding company originally listed in Singapore in 2008. Its two main business segments are aquaculture production and abalone processing and distribution, but it also operates the " Ah Yat Tian Xia" chain of restaurants with outlets in China, Hong Kong, Taiwan and Singapore.
The company expanded from 21 restaurants in 2010 from 14 units in late 2009, but has since cut back to 13 outlets as expansion costs outstripped its revenue, OCBC Investment Research said in a March 2011 report on the company.
Oceanus reported in March its fourth quarter net profit swung to a loss of 45.6 million yuan ($8.6 million), compared with a net profit of 59.1 million yuan a year earlier.
Oceanus’ abalones are farmed along the coasts of Fujian and Guangdong provinces in China. As of Dec. 31, Oceanus had 30,123 abalone breeding tanks and an abalone population of 178.4 million units of abalones. Oceanus’ biological assets were valued at 1.155 billion yuan as of the end of last year.
According to Starmine’s SmartEstimate, Oceanus is trading at a 12 months forward price-to-earnings ratio of 6.3 times, compared with its sector median of 11.8 times, as of the close of Thursday.
