Koufu Group has proposed to acquire a group of four companies that are among its biggest suppliers of fried food and dough products.
Mainboard-listed Koufu, which runs foodcourts, coffee shops and a mall, will fund the $22 million deal using internal resources, including proceeds from its initial public offering.
It will become the sole investor in each of the four companies - Deli Asia, DeliSnacks, Dough Culture and Dough Heritage - once the sale is completed, it said yesterday.
The four make up the Deli Asia group, which was founded by Mr Alex Ong and his wife Irene Lee.
The group supplies frozen and partially fried food products to restaurants and food and beverage (F&B) stalls at foodcourts, coffee shops and hawker centres.
It licenses its DeliSnacks brand to about 60 franchised stallholders at hawker centres and coffee shops that sell its products.
The Dough Culture brand operates seven kiosks here at various locations, including suburban malls, selling fried food and dough products such as banana fritters as well as Chinese desserts and drinks.
Ms Lee and Ms Doreen Ong - two of the three shareholders of Deli Asia - have signed a service agreement with Koufu to provide consultancy services for one year.
Ms Lee and Ms Ong each have more than 25 years of experience in the F&B industry.
Business at the four companies has been resilient during the circuit breaker period as they cater predominantly to a mass consumer takeaway market, Koufu added.
The Deli Asia group has production facilities and a warehouse here that manufacture and store fried and partially fried food and dough products, Koufu added.
These products are highly complementary to the range of dim sum items Koufu sells at stalls in its foodcourts and coffee shops.
"The proposed acquisition will provide important synergistic effects for Koufu, and will broaden (its) manufacturing capabilities, inject intellectual know-how to increase productivity within its existing food production and storage processes, and strengthen the security of its supply chain," Koufu said.
It added that the timely acquisition will allow it to immediately use Deli Asia's production facilities before the expected completion of its own new headquarters and integrated facility this year.
Once the integrated facility is completed, Koufu plans to gradually shift Deli Asia's production facilities and warehouse there. This will consolidate its food preparation and processing with Koufu's central kitchens to optimise economies of scale and operating synergies.
Koufu said consolidating its ordering, production, product research and development and distribution processes was a key driver in building the new facility.
Koufu chief executive Pang Lim said the proposed acquisition will help Koufu develop its supply chain of "well-loved oriental favourites" sold at its foodcourts, coffee shops and quick-service restaurants.
"This will add a greater variety of quality choices... for all our consumers," Mr Pang added.
The proposed deal will also give Koufu immediate access to third-party businesses locally and overseas as well as provide opportunities to expand the F&B retail business to include frozen and partially fried food products to supermarkets and export markets.
Koufu intends to expand the Dough Culture kiosk network from seven to at least 20 in the next five years, Mr Pang said.
Deli Asia's Mr Ong said he believes Koufu "can take the brands further and bring the business to an all-new level, with our combined expertise, network and manufacturing capabilities".
Koufu shares closed 0.7 per cent up at 69.5 cents yesterday after the announcement.
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