Sime Darby Bhd sold its entire 22% stake in Palmco Holdings Bhd for RM306.2mil or RM6.90 per share in a private placement yesterday, in the process netting a profit of close to RM94mil on its two-year investment.
Group chief executive Tan Sri Nik Mohamed Yaacob said in a statement that the decision to sell was primarily because the investment in Palmco no longer met Sime Darby's overall objective.
“One of the original objectives was to hedge the group against the highly cyclical earnings of its plantation operations. However, since then, Palmco has diversified significantly from its core oleochemicals business following its acquisition of Unilever's Malaysian plantation business,'' the statement said.
“As such, Sime Darby has decided to capitalise on the buoyant equity market conditions and realise gains of close to RM94mil on a two-year investment against a cost of RM4.58 per share,'' it added.
The disposal is not expected to have any material effect on the earnings or net tangible assets of Sime Darby for the year ending June 30, 2004.
CIMB Bhd acted as the placement agent for the Palmco share sale.
The disposal brings to a conclusion a takeover saga that started in July 2001 when Sime Darby made an unexpected conditional voluntary offer for all the shares – at RM4.35 apiece – and warrants in Palmco, an established oleochemicals manufacturer.
Within hours of the announcement, IOI Corp Bhd – then the largest single shareholder of Palmco with a 32.1% stake – said it did not intend to accept Sime Darby's offer.
The Palmco board told the KLSE on the same day that it was ''considering the option of seeking an alternative person to make a takeover offer'' for its shares.
Sime Darby said Palmco represented a good opportunity that had synergy with its existing activities, and would provide a platform for further growth in its plantation business.
The offer by Sime Darby sparked retaliation from IOI Corp which, within days, announced it was matching Sime Darby's offer. Sime Darby later increased its offer to RM4.60 per share.
Although Sime Darby said the bid was not hostile, others disagreed, saying it was rare that one company would make an offer for another when it was not known to be up for sale.
Its offer to gain control of Palmco also coincided with a flurry of other takeover bids, including the government's decision to wrest control of United Engineers (M) Bhd, giving the KLSE a big lift in terms of investor attention.
Sime Darby's bid for control of Palmco ended on Oct 4 when IOI Corp announced it had more than 50% of Palmco. Over the next 13 months the two companies resolved issues regarding the listed status of Palmco and board representation for Sime Darby officials on Palmco.
Palmco shares were re-quoted in November last year after being suspended for 13 months but fell substantially over the next few days to a low of RM3.56. Its share price has since doubled in value and closed yesterday at RM7.10, down 15 sen.
The company also recently announced full-year results that saw its revenue cross the billion-ringgit mark for the first time, posting RM1.1bil for the financial year ended June 30, a 41.3% improvement over the RM778.2mil recorded a year ago.
And its net profit for the year, at RM136.2mil, was 20.6% higher than the year-ago's RM112.94mil. Earnings per share worked out to 67.52 sen, compared with 58.95 sen previously.
The company said the much improved result was also due to the completion of expansion works at the manufacturing plant of a subsidiary, which resulted in higher overall capacity. This was complemented by the group's acquisition of Unipamol estates, which raised its mature plantation by three times.
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