In a bid to better integrate its business options, Coco Lanka PLC (Coco) is planning to purchase a distribution firm, a Coco director said.
Coco, a public listed firm has Renuka Agri Foods, Renuka Organics, Renuka Teas and Ceylon Forestry with Renuka Agri Foods as subsidiaries. “These subsidiaries are engaged in the manufacture and export of coconut products, organic products and value added teas. We are looking for distribution control for these products, which is why we are targeting to buy a distribution firm,” a Coco director told the Business Times.
Analysts say that this move will be good for their horizontal and vertical integration. “Coco will end up making money by purchasing such a company,” Jaliya Wijeratne, Director SMB Securities told the Business Times. He said that such an acquisition is attractive because it allows Coco to enter a new market without having to take on the risk, time and expense of starting a new division. “If the company decides to purchase a firm that is profitable and has good distribution capabilities in new areas, it will enhance the company’s strategic capabilities as well,” he said.
The Coco director said that the company is open to even buy a competitor. Mr. Wijeratne noted that in the event that Coco decides to take over a competitor not only because the competitor is profitable, but in order to eliminate competition, it will make it easier, in the long term, to raise Coco’s product prices. |
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