Sime Darby approves final terms of restructuring proposals

MIDF Research said Sime Darby registered the highest net money inflow of RM25.37mil last week

KUALA LUMPUR: The board of directors of Sime Darby Bhd (SDB) has approved the final terms of the group’s restructuring proposals to create three standalone listed entities in the Plantation, Property and Trading & Logistics sectors on the Main Market of Bursa Malaysia Securities Bhd.

The proposals involve the restructuring of the Group’s borrowings, transfer of assets within the group and the settlement of intercompany balances together with a proposed share split and share distribution.

1.    Restructuring of Borrowings

SDB has novated its US$1.5bil Multi-Currency and RM3bil Perpetual Subordinated Sukuk programmes to Sime Darby Plantation Bhd with an outstanding principal amount of US$172mil (RM740mil) and RM2.2bil, respectively.

As for its Islamic Medium Term Note (iMTN) programme, an early redemption of RM300mil and RM400mil with maturity dates of 9 December 2022 and 10 December 2027 respectively, have been completed.

2.    Transfer of Assets within the Group

Sime Darby Property Bhd and Kumpulan Sime Darby Berhad (KSDB), a wholly-owned subsidiary of SDB, had each entered into separate sale and purchase agreements (SPA) with Sime Darby Plantation to acquire land located in Labu, Seremban which have been earmarked for the Malaysia Vision Valley (MVV) project. This entails the transfer of 8,793 acres to KSDB and 1,944 acres to Sime Darby Property, amounting to an aggregate sale value of RM3.2bil. Sime Darby Plantation will leaseback and carry out the management of the existing oil palm estates on the designated MVV land until the commencement of the MVV project.

3.    Settlement of Intercompany Loans

For Sime Darby Plantation, the net intercompany loans owing to SDB will be capitalised via issuance of new Sime Darby Plantation shares amounting to RM500 million in value, leaving a balance cash settlement of RM310mil. Sime Darby Property will also issue new shares for RM4.4bil in value and the remaining balance will be settled via cash of RM424mil.

Post internal restructuring, Sime Darby Plantation’s issued shares will increase from 600 million to 1.1 billion. The shares will then be subdivided into 6.8 billion Sime Darby Plantation shares so that it is similar to SDB.

The share split for Sime Darby Plantation and issuance of new Sime Darby Property shares pursuant to settlement of intercompany loans will ensure that SDB’s entire shareholdings in both Sime Darby Plantation and Sime Darby Property are distributed such that all the entitled shareholders will receive shares in both entities, equal to their shareholding in SDB.

As a next course of action upon completion of the above measures, Sime Darby Plantation and Sime Darby Property will seek admission into Bursa Malaysia. The new and more focused SDB will remain listed on Bursa Malaysia.

This restructuring plan will be instrumental in enabling the entities to accelerate their growth on the back of the benefits expected to be derived from this landmark pure play exercise.

“With the unveiling of the final terms of the restructuring plan, we have reached yet another milestone in this exciting journey towards bringing the Sime Darby businesses to a whole new level. We are on-track and every effort has been taken to ensure that the interests of key stakeholders are considered,” said Tan Sri Dato’ Seri Mohd Bakke Salleh, SDB’s President and Group Chief Executive.

“Other than the financial restructuring exercise that is ongoing, we have also undertaken a Group wide exercise to recalibrate and reassign the Group’s human resource capabilities based on the needs of the three pure plays. A third parallel workstream is the development of short, medium and long term strategies that will ensure that the three companies realise their full potential. The three exercises are running in tandem and are crucial to setting the stage for the respective entities as they pursue their respective value-creation strategies,” Mohd Bakke added.

The restructuring plan will ensure that each of the three entities will have the relevant financial resources and talent to execute their growth strategies.

“The immediate priority is to execute the restructuring plan and enhance the fundamentals to allow shareholders to participate directly in the equity and growth of the pure plays as part of unlocking sustainable value,” Mohd Bakke said.