KLK-BPlant deal aborted

KLK and BPlant announced that the transacting parties have mutually agreed to terminate the deal, with immediate effect on Oct 4.

PETALING JAYA: After much speculation, the RM1.15bil takeover deal between Kuala Lumpur Kepong Bhd (KLK) and Boustead Plantations Bhd (BPlant) has been aborted.

It was announced yesterday that Boustead Holdings Bhd (BHB), the single largest shareholder of BPlant, is required to return the deposit of RM229.15mil to KLK as a result of the termination.

BHB is given 14 business days from Oct 4 to return the amount, or such other later date as may be agreed between the parties.

In separate filings with the stock exchange, KLK and BPlant announced that the transacting parties have mutually agreed to terminate the deal, with immediate effect on Oct 4.

BPlant said it was informed by its controlling shareholders, BHB and the Armed Forces Fund Board (LTAT) that the condition precedent under the strategic collaboration agreement (SCA) will not be satisfied by the Oct 6 cut-off date.

“And accordingly, the parties to the SCA have agreed not to proceed with the proposed strategic collaboration,” it said.

Meanwhile, KLK said the termination is not expected to have any material effect on its earnings, earnings per share, net assets and net assets per share of the KLK Group for the financial year ending Sept 30, 2024.

BHB holds a 57.42% stake in BPlant, while LTAT holds 10.59%. LTAT fully owns BHB after it privatised the conglomerate in June this year.

On Aug 24, KLK, BHB and LTAT signed the SCA, which the parties said provided a “framework for value creation”.

Under the SCA, LTAT, BHB and KLK as joint offerors were supposed to undertake a mandatory take-over offer to acquire all the remaining BPlant shares not already owned by them at a cash offer price of RM1.55 per BPlant share.

The offer is triggered as a direct outcome of the acquisition by KLK of a total of 739,199,966 ordinary shares in BPlant representing 33% and one share of the total issued shares of BPlant from BHB for a cash consideration of RM1.15bil.

The offer price valued BPlant at RM3.47bil.

Following the signing of the SCA, KLK has been buying BPlant shares via a series of open market share acquisitions.

A number of bourse filings by BPlant showed that KLK had acquired a direct stake of 3.09% or 69.29 million shares, and an indirect or deemed interest of 33% or 739.19 million shares.

The shares were acquired by various companies and individuals linked to KLK including its chief executive officer Tan Sri Lee Oi Hian and his brother Datuk Lee Hau Hian, who is a non-independent non-executive director of KLK.

BHB desperately needed the deal to take place to avoid the company from going bankrupt by year-end.

There is a RM800mil “debt guillotine” hanging over BHB’s head, which adds to its parent’s – LTAT – headache.

LTAT is already facing a tough time dealing with its cash-strapped pharmaceutical arm Pharmaniaga Bhd that fell into the Practice Note 17 category in February 2023.

Without the KLK-BPlant deal, an analyst said the government may even need to step in for a bailout to help BHB.

“This is not desirable, but it remains a possibility in the worst-case scenario,” according to the analyst.

Had the deal gone through, KLK planned to eventually control a 65% stake in BPlant and to take the company private.

The remaining 35% would have continued to be held by BHB and LTAT.

It is noteworthy that KLK has a long-term strategy of expanding its plantation business.

In September 2021, KLK completed the acquisition of a 56.2% equity interest in IJM Plantations Bhd for RM1.53bil. At the time of the purchase, IJM Plantations boasted a total planted area of 61,277 ha across Sabah and Kalimantan.

IJM Plantations was then delisted in December 2021.

Currently, KLK has a vast landbank of about 300,000 ha, according to its website.

In terms of geographical distribution, approximately 56% of the plantation landbank is located in Indonesia, 42% in Malaysia and 2% in Liberia.

The acquisition of BPlant would have further expanded the upstream business, as BPlant has a total landbank of 98,200 ha, of which 73,500 ha or 75% is used for oil palm cultivation.

About two-thirds of BPlant’s area under oil palm cultivation are located in Sabah and Sarawak.

In a previous note, MIDF Research described the KLK-BPlant deal as an “synergistic acquisition” that would lead towards value-accretive expansion.

“We believe that KLK’s offer is consistent with its long-term strategy to increase its interest in the upstream business,” it said.

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