China Food sells animal feed business

China Food Company (CFC), the Chinese manufacturer of cooking and dipping sauces, has entered into an agreement with Wisehand Planning, a Korean-owned investment holding company, to dispose of the group's animal feed business, for a total consideration of 16m dollars.

The business, part of CFC's wholly-owned subsidiary, Full Fortune Holdings, generated pre-tax profit of around £1.6m in 2011, meaning the total consideration represents an exit multiple in excess of six times post tax earnings.

Under the sale, the existing animal feed business will be sold for $8.75m, the new feed factory for $5.5m and the land on which a new factory is being built will trade hands at $1.75m.

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The transaction is expected to be completed by July 30th, by which time the first payment of $4.5m is also due. The timing of the other payments is based on certain milestones.

The disposal is expected to result in a one-off gain of around £4.8m.

John Mclean, Chairman of China Food, said: "The board is pleased with the progress of the disposal of the feed business at a reasonable price despite the depressed stock markets. As a result of the disposal, the company will be able to focus on its core condiments business and the proceeds of the disposal will be used for working capital and restructuring the group's lending facilities."

The share price rose 4.17% to 25p by 10:13.

NR