January 16, 2015 / 11:05 AM / 5 years ago

UPDATE 1-Indonesia's Indofood to cut stake in China Minzhong

* Indofood to sell 347 mln China Minzhong shares at S$1.20 each

* Sale to investment vehicle controlled by company executives

* Sale will cut Indofood’s stake in China Minzhong to 29.94 pct

* Indofood says China Minzhong needed longer time to reach targets (Adds analyst comment, background)

By Eveline Danubrata

JAKARTA, Jan 16 (Reuters) - Indonesian instant noodle maker PT Indofood Sukses Makmur Tbk will cut its stake in China Minzhong Food Corp Ltd more than a year after it became the controlling shareholder of the Singapore-listed vegetable processing firm.

Indofood plans to sell 347 million shares in China Minzhong Food at S$1.20 each to China Minzhong Holding Ltd, an investment vehicle controlled by the food processing company’s senior executives, including the chief executive.

The sale, due to be completed by June, would raise S$416.4 million ($314 million) for Indofood and reduce its stake in China Minzhong Food to 29.94 percent from 82.88 percent, the Indonesian company said in a stock exchange filing late on Thursday.

Indofood said it was cutting its stake because China Minzhong Food “needs a longer time to reach the targeted result, bearing in mind the current investment sentiment level in China”. It did not give further details.

Indofood will make a 7.1 percent gain from selling the shares, acquired after it launched an offer at S$1.12 per share in September 2013 following criticism by short-seller Glaucus Research which had wiped out almost half Chinese group’s stock market value.

Glaucus had questioned China Minzhong Food’s accounting practices, including an alleged fabrication of sales figures to the company’s top two customers, charges that China Minzhong Food strongly denied at that time.

“Indofood seems to want to exit China Minzhong. At least Indofood will make some capital gains from the sale, so we see this as positive for them,” said Adrianus Bias Prasuryo, senior analyst at Ciptadana Securities.

“It’s better to sell down rather than to keep a controlling stake in China Minzhong, which could drag down their earnings.”

In December, Indofood agreed to form a joint venture with Brazil’s BRF SA, the world’s largest poultry exporter. The 50/50 venture will require investments of about $200 million over the next three years, according to BRF.

$1 = 1.3241 Singapore dollars Reporting by Eveline Danubrata; Editing by Miral Fahmy and David Holmes

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