WHAT will the outlook be for Sabah-based planter Kretam Holdings Bhd if Hap Seng Plantations Bhd gets to buy into the company?
Recall that fellow Sabah planter Hap Seng Plantations is proposing to buy 55% of Kretam for 92 sen a share. The deal will need the approval of Hap Seng Plantation’s shareholders. Kretam’s major shareholder Datuk Freddy Lim is selling the 55% block to Hap Seng Plantations. Lim will have a balance 15.3% of which he has given an undertaking that he will not sell this into a general offer by Hap Seng Plantations. And neither will he divest this block in the next five years.
On a positive note, the entry of Hap Seng Plantations will likely solve a nagging issue with Kretam, namely its shareholding spread.
Kretam’s public shareholding fell to below the 25% mark after Lim’s conversion of irredeemable convertible preference shares (ICPS) that were issued in 2011.
Lim ended up with additional shares and ICPS after he injected his private assets comprising plantations, bio-diesel plants and a company with the licence to export crude palm oil into Kretam for RM527mil.
The Kretam shares were issued at RM2.30 each and the conversion of the ICPS were at the same price. After the conversion of the ICPS towards end of 2016, Lim ended up with 60% of Kretam.
Lim injected his private assets in Kretam after a failed takeover offer for the plantation company in 2010. Lim and parties acting in concert have offered to take Kretam private at RM1.43 per share.
However, the offer did not get much response from minority shareholders.
Back to the plans of Hap Seng Plantations. According to their stock exchanging on this proposed deal, Hap Seng Plantations intends to keep Kretam listed. It also said that it will explore various measures, including the placement of new Kretam shares, in order to address the public shareholding spread issue.
Under the deal between Hap Seng Plantations and Kretam, Lim had entered into two agreements with Hap Seng Plantations to divest his direct and indirect shareholdings in Kretam.
The first is a conditional share sale agreement (SSA) between Lim and Hap Seng Plantations for the sale of 779.34 million Kretam shares, or a 33.5% equity interest in Kretam for RM716.99mil cash or 92 sen per Kretam share.
The second is a conditional SSA between Santraprise Sdn Bhd (a company controlled by Lim) and Hap Seng Plantations for the sale of 500.86 million Kretam shares, representing a 21.5% equity interest in Kretam for RM460.79mil cash or 92 sen per Kretam share.
As at Feb 21, Lim had a direct and indirect interest of 1.13 billion shares and 500.86 million shares in Kretam, respectively.
Assuming the completion of both the SSAs, Lim’s interest in Kretam will reduce to 355.41 million shares or a 15.3% stake.
Shares in Kretam has been trading sideways for the longest time, had recently gained interest. On a year to date basis, Kretam share price has risen more than 57% to 85 sen a piece.