Ottogi Corp. South Korea’s third-largest food maker by sales, will absorb two affiliates - Sangmi Food Holdings Co. and Richwood P&P Co. - to streamline governance structure.

Ottogi announced in a disclosure Tuesday that it will merge with Sangmi Food Holdings on a swap deal at a ratio of 1:0.8689831, which will create 136,256 new common shares, and with Richwood P&P at 1: 0.2566758 that will lead to issuance of 28,981 new shares. The mergers will take effect from Friday.

On Wednesday, shares of Ottogi gained 1.95 percent and ended at 836,000 won.

“The mergers are aimed at simplifying ownership structure and improving transparency,” said an official from the company. “The mergers will end up enhancing corporate value by enabling efficient use of business and management resources.”

As part of its reorganization efforts, the company last year took over stakes of its four affiliates - Ottogi Logistics Service, Ottogi SF Holdings, Adrich Communications, and RDS.

Meanwhile, Kiwoom Securities on Wednesday maintained its ‘buy’ recommendation for Ottogi with a price target of 950,000 won ($840.41), saying that its mainstay items including instant noodles, processed rice products, and frozen food would generate stable profits and expectations on the reorganization would boost its share price.

By Lee Duk-joo and Choi Mira

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