Sats acquires additional 40% stake in China aviation meal producer for 312.6 million yuan

[SINGAPORE] Cargo handler and in-flight caterer Sats on Wednesday (May 6) said it will acquire an additional 40 per cent stake in China’s leading frozen aviation meal manufacturer for 312.6 million yuan (S$58 million).

This brings Sats’ total shareholding in Nanjing Weizhou Airline Food Corporation (NWA) to 90 per cent, following its initial investment for 50 per cent ownership in 2019, allowing the group to consolidate operational control over the business.

Since that initial capital injection, Sats noted that NWA has more than doubled its revenue as Chinese carriers accelerated their adoption of frozen meals in domestic operations.

Headquartered in Nanjing, NWA supplies frozen meals, snacks and related food products to airline customers across China. Its network of on and off-airport assembly kitchens around the country extends its reach.

Sats noted that acquiring the additional stake will let Sats China and NWA align their operating models. This would optimise production capacity and increase efficiencies.

Sats also said that NWA’s competitive position “has proven to be resilient”. It “recovered strongly” from the disruptions caused by the Covid-19 pandemic, as well as “outperformed initial growth expectations”.

It has since maintained its leading market position, added Sats, describing the company as “an important pillar of Sats China’s strategy to capitalise on” Chinese airlines’ increasing adoption of frozen aviation meals.

Sats said the purchase price will be funded through internal resources and paid in cash.

The transaction is not expected to have any material impact on the group’s net tangible assets per share and consolidated earnings per share for the current financial year.

Aligning interests

To align shareholder interest post-pandemic, Sats China terminated the original earn-out agreement set out in 2019 with Luo Bo, the founder and general manager of NWA.

Sats noted that NWA has already surpassed its underlying performance targets, entitling Luo to receive these earn-outs over the next five years.

The group has negotiated a new shareholders’ agreement with Luo, allowing it to retain the right to acquire his remaining 10 per cent stake in NWA in one or more tranches at a fixed aggregate amount of around 78 million yuan.

Samuel Koh, chief executive officer of Sats Food Solutions, said: “NWA has built something exceptional in China’s aviation food sector: a proven frozen meals platform with the operational capability, customer relationships, and production know-how to grow at scale.”

Shares of Sats closed 0.9 per cent or S$0.03 higher at S$3.32 on Wednesday, prior to the announcement.