EIC plans to seek approval of the shareholders at the Extraordinary General Meeting of Shareholders on Tuesday, 9 July 2019, for Food Holding Co., Ltd., its subsidiary, to acquire 100% of the ordinary shares of Eastern Cuisine, which operates eight Shabu restaurants branded “KAGONOYA”, at the price of THB 40.54 per share, amounting to THB 300 million, whereby one of the sellers of the shares to Food Holding Co., Ltd. is a spouse of a director and an executive of EIC.

The independent financial advisor (IFA) is of the view that the shareholders should not approve the transaction because the offered price is higher than the fair value of THB 17.84 per share appraised by the independent financial advisor (IFA), by applying the discounted cash flow approach (DCF) or amounting to THB 132.02 million.  In addition, the company may be subject to risks that the transaction may have a material impact on the company, in that the company may not have sufficient funds, the operating results and returns of Eastern Cuisine may not meet the expectation as Eastern Cuisine had suffered losses for the past three years.  As a result, the period of return for EIC may be more than 20 years.

In addition, the company may be exposed to various risk factors: the risk of not receiving money from the original shareholders of Eastern Cuisine under a sale back agreement which guarantees the operating results; the risk of lack of expertise in the restaurant business; the risk of delay in entering into the transaction due to the fact that various conditions precedent must be satisfied; and the risk of not receiving the refund of the security deposit of THB 45 million if the share acquisition of Eastern Cuisine is not completed, etc.

However, the Board of Directors and the Audit Committee of EIC were of the opinion that the share acquisition of Eastern Cuisine at the price of THB 300 million was appropriate, reasonable, and in the interest of the company because the business is on a continuous growth trend; the transaction is fully qualified in accordance with the company’s investment policy framework; the business will generate cash flow immediately; and the transaction will pave the way for the company to enter the food business.  In addition, the share price is reasonable and the risk that the return on investment will not meet the target because there is a sale back agreement in the case that the sale of Eastern Cuisine does not meet the target.                                             

However, the company had engaged a financial advisor, who is not recognized by the SEC Office, to evaluate the shares of Eastern Cuisine by the discounted cash flow approach (DCF), which yields the value of THB 283.94 – THB 361.80 million based on the estimated revenue from the targeted average bills per day and the numbers of bills of other similar restaurants.  In addition, there is a marketing plan to increase customers in order to meet the target. The independent financial advisor had estimated the revenue based on the past operating results and taken into account the average growth in spending in the industry.  Therefore, the Board of Directors is of the view that the assumption of revenue by the financial advisor is both reasonable and possible.

Accordingly, the transaction is considered an asset acquisition and a connected transaction because EIC will acquire shares of Eastern Cuisine from a shareholder who is the spouse of a director and an executive of EIC.  Therefore, the transaction must be approved at a meeting of shareholders by a vote of not less than three-quarters of the total votes of the shareholders attending the meeting and having the right to vote without counting the votes of the shareholders who have an interest in this matter.

The shareholders are strongly advised to review the information and exercise their right to protect their interest, as well as to request information from the executives of EIC in order to have complete information for their decision-making.

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