Kido Frozen Foods Joint Stock Company (Kido Foods) is seeking its shareholders’ approval for a merger plan with Kido Group in hopes of better exploiting the parent company’s financial and managerial advantages.

In the document sent to shareholders before its annual shareholders’ meeting, slated for June 9, Kido Foods said after three years since becoming a public company, its business activities and share trading have yet to meet the company’s expectations.

The company’s shares debuted on the Unlisted Public Company Market (UPCoM) on September 28, 2017 under the code KDF. However, liquidity of the shares was low with several thousand shares being traded each day, which does not accurately reflect the company’s value.

Kido Foods has maintained its leading position in the ice cream industry during 2017-19 with the market share rising from 38.1 per cent in 2016 to 41.4 per cent in 2019. However, the business results were volatile with the 2018 net profit reaching just VND27.4 billion (US$1.2 million), the company reported.

Though Kido Group is holding 36.4 million shares of Kido Foods, equivalent to 65 per cent of the company’s charter capital, an independent shareholder structure makes it difficult for the parent company to fully support its subsidiary while Kido Foods cannot take full advantage of Kido’s financial and managerial strength.

“Based on the view that Kido Foods is an important link to Kido Group’s strategy development in the future, merging Kido Foods into Kido Group is necessary,” the company said, adding that the merger will also help it make use of other Kido Group subsidiaries’ advantages for a joint value.

According to the merger plan, Kido Group will issue an additional nearly 23.1 million shares to swap more than 17.76 million shares of Kido Foods, equivalent to 32.79 per cent of its total outstanding shares. The swap ratio is estimated at 1:1.3, which means one Kido Foods share can be exchanged for 1.3 shares of Kido Group. After the merger, Kido Foods will become a one-member limited liability company wholly owned by Kido Group.

The merger is expected to be complete in October after shareholders of the two companies approve the plan in the June shareholders’ meetings. New shares will be officially listed on the Ho Chi Minh Stock Exchange in the same month.

Due to the pandemic, Kido Foods plans to lower its revenue target slightly to nearly VND1.4 trillion ($60 million) this year but pre-tax profit up 5.4 per cent to estimated VND195 billion ($8.4 million).

By March, the company recorded net revenue of VND260 billion, down 2.3 per cent year-on-year, but profit before tax increased by 15.9 per cent to VND27.3 billion. — VNS