This article first appeared in The Edge Financial Daily on June 5, 2018

KUALA LUMPUR: The sharp decline in Kretam Holdings Bhd shares yesterday raised questions over whether the proposed takeover by Hap Seng Consolidated Bhd, which had been delayed, has now fallen through.

However, when contacted, a spokesman at Hap Seng said due diligence is still ongoing and that there has been no material change as yet.

Kretam plunged some 16 sen or 20.15% yesterday to 62 sen, its lowest point since Jan 12.

The plantation and palm oil refining company had been the ninth largest decliner on the local bourse as some RM372.42 million of its market capitalisation was erased to leave it with a market value of RM1.44 billion.

The decline in the share price triggered the suspension of Kretam shares from proprietary day trading and intraday short selling by Bursa Malaysia yesterday afternoon as the share price dropped more than 15 sen or 15% from its reference price.

A total of 1.67 million of Kretam shares were traded yesterday.

On May 30, Hap Seng told the press that it had “underestimated the amount of time needed” to complete due diligence for the proposed acquisition. It had received a second extension until end-June to complete the due diligence.

“We thought we could get everything done within three months but quite unfortunately, things didn’t turn out the way we had expected,” Hap Seng executive director Cheah Yee Leng said then.

Hap Seng on Feb 21 this year entered into conditional share sale agreements with Kretam group managing director Datuk Freddie Lim Nyuk Sang, and Santraprise Sdn Bhd to acquire a 55% stake in Kretam via its 53.04%-owned subsidiary Hap Seng Plantations Bhd.

However, analaysts have called the initial offer at 92 sen per share, or a total of RM1.18 billion for 1.28 billion shares in Kretam, pricey as it represented a 62.5% premium to Kretam’s 12-month average share price of 56.6 sen when the deal was announced.

Kretam had announced an 88.08% decline in net profit to RM1.52 million for its first quarter ended March 31, 2018 (1QFY18) on the back of a downtrend in refined commodity prices. This was despite an increase in revenue for the quarter by 13.43% to RM160.89 million on the back of higher fresh fruit bunch production.

Shares in Hap Seng meanwhile closed down one sen or 0.1% yesterday at RM9.69, leaving the group with a market capitalisation of RM24.13 billion.