TWO listed units of Permodalan Nasional Bhd (PNB) – Golden Hope Plantations Bhd (GHope) and Island & Peninsular Bhd (I&P) – have announced a RM3.6bil merger, creating the second largest plantation group, and the largest property company, on the KLSE.
Under the proposal announced yesterday, GHope will acquire 99.6% of I&P's plantation unit, Austral Enterprise Bhd, with I&P retaining the balance 0.4%.
As for I&P, it will assume control of GHope's property arms, taking a 60% stake each in Golden Hope Development Sdn Bhd (GHDSB) and Golden Hope Properties Sdn Bhd (GHPSB) as well as 100% of Golden Hope Johor Sdn Bhd. GHope will retain a 40% interest each in GHDSB and GHPSB.
I&P will also undertake a voluntary general offer for the balance stake in its property unit, Negara Properties Bhd, at RM4.39 per share with a conditional 50% acceptance.
A surprise twist to the deal was the acquisition by I&P of 100% of Syarikat Perumahan Pegawai Kerajaan Sdn Bhd (SPPK) from Amanah Raya Bhd (70.1%) and Minister of Finance Inc (29.9%). Amanah Raya is the trustee for Sekim Amanah Saham Bumiputera, managed by PNB.
The proposed merger is expected to take at least six months to complete, subject to approvals from the relevant authorities and the respective shareholders. PNB, which currently owns a 60.2% stake in GHope and 52.8% of I&P, will refrain from voting at an EGM to be convened. PNB will eventually have 58.2% stake in GHope and 60.2% stake in I&P.
The proposed rationalisation and merger of the two PNB-controlled companies will see GHope's planted areas rising to 129,474ha from 91,162ha, and its total estate land (including infrastructure) swelling to 189,556ha from 128,118ha. This will make GHope the second largest plantation group in the country behind the Federal Land Development Authority (Felda), which has 811,140ha of estate land.
As for I&P, the proposed exercise will result in it owning the largest land-bank among the KLSE's property players with 9,158ha, compared with 1,000ha now. It is estimated that 50% of the land is in the Klang Valley.
The proposed deal will be financed almost entirely with a share swap, based on the five-day average price of GHope of RM3.46 and I&P of RM3.40, except for the acquisition of the 60% equity in GHPSB by I&P, which will involve a RM750,000 cash payment.
GHope was priced at 82 sen below its book value of RM4.28 at June 30, while I&P was 2 sen lower than its net tangible assets (NTA) per share of RM3.42 at April 30 this year.
Before their suspension on Sept 12, GHope shares were trading at RM3.44 and I&P at RM3.38.
Commenting on the proposed exercise, GHope group chief executive Datuk Abdul Wahab Maskan told a press conference in Kuala Lumpur yesterday the merger would provide the plantations group with opportunities to make further inroads into the agricultural business.
“It gives us a greater focus to be involved in downstream manufacturing, such as oleochemicals, and in upstream sectors such as research and development and plantation activities,” Wahab said after a signing ceremony to mark the merger.
He said the proposed merger would also allow GHope to vary its earnings base by being involved in the full spectrum of plantation activities, instead of going into other sectors such as property.
“Our involvement in downstream activities such as in oil and fats production will provide the balancing role for our earnings,” he said, adding that manufacturing activities could benefit the group when palm oil prices dipped.
I&P managing director Dr Radzuan Abdul Rahman said the merger gave the group's shareholders a second opportunity to unlock their investment following the merger with its plantation unit, Austral Enterprises Bhd, which had since been de-listed from the KLSE.
“Besides making us the number one property company on the KLSE, it gives us the opportunity to eventually turn the group into a property supermarket with enough land-bank to satisfy immediate and long-term goals,” he said.
He said I&P was expected to come up soon with a blueprint for the group's property development.
Meanwhile, analysts said the proposed merger was expected, and would bring a step closer the government's plan, announced early this year, to rationalise government-owned plantation and property groups.
Early this year, Kumpulan Guthrie Bhd, which is 73.2% owned by PNB, had proposed to merge its plantation companies and rationalise its property activities under a listed entity.
“I believe the PNB plantations activities will eventually go under one roof, with an even bigger plantation group created at a later stage,” said an official from a PNB plantation company. He added that the latest merger was significant because many had doubted that plantation mergers would materialise so soon.
Analysts said the inclusion of SPPK signalled that the government or PNB wanted to speed up the merger process.
The managements of GHope and I&P expressed confidence that the proposed exercise would be well-accepted by shareholders as it would give them the opportunity to own shares in both property and plantation companies.
Mayban Securities Sdn Bhd plantation analyst said the merger would enable the two groups to tap each other's strengths. “GHope is known for its plantation operations while I&P has made its mark in the property industry with projects such as Bandar Kinrara in Puchong,” he said.
It was also an opportunity for GHope and I&P to enhance their respective balance sheets and take advantage of some of the changes outlined in the recent budget, said a plantation analyst with a local brokerage.
Analysts said most investors had already factored in the merger in their valuation of the two companies.
“The exercise will enable investors to choose between I&P for property, or GHope for plantation, but I believe the valuation has taken into account the counters' current price,” said the Mayban analyst.
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