MERGER ANALYSIS AND VALUATION OF PT KIMIA FARMA TBK AND PT INDOFARMA TBK

• Main Author: Kusuma, Randy
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/64033
• Institution: Institut Teknologi Bandung

Under the 2014-2019 roadmap, Indonesia’s Ministry of State-owned Enterprises (SOEs) plans to cut the number of SOEs from 119 to 85 and restructure them into 15 sector-based holding companies to improve efficiency. Within healthcare sector, the government has re-initiated the merger plan of PT Kimia Farma Tbk and PT Indofarma Tbk. The government is now considering whether the merger, which actually has been planned since 2005, should be conducted prior to the establishment of holding company, or not. At one side, the government believes that the merger will diminish business overlap between these two SOEs and catalyze growth through synergy. In spite of that, some concerns start to emerge around the plan, including disagreement among stakeholders and the uncertain impact of JKN scheme to both companies, among others. Given the aforementioned issues, the purpose of this research is to analyze the feasibility of the merger and propose the most appropriate acquisition scheme. As for the methodology, the author uses PESTLE, SWOT and TOWS to perform qualitative analysis at the economy, industry and company level. For the quantitative analysis, the author performs firm valuation using Discounted Cash Flow (DCF) method to calculate the standalone and post-merger values of both firms. Eventually, the result shows that there is expected synergy that comes from revenue enhancement and costs reduction with total value of IDR 968,332,350,219 under base case scenario, IDR 361,754,014,000 under downside scenario, and IDR 1,274,420,797,608 under upside scenario. The best scheme for this merger will be PT Kimia Farma Tbk acquiring PT Indofarma Tbk using 100% stocks with 0.41 exchange ratio. Through this merger, the two companies will form a stronger and more efficient pharmaceutical SOE that can withstand competition in years to come.