KUALA LUMPUR: Sime Darby Bhd has decided not to proceed with its planned acquisition of Kulim (M) Bhd’s 48.97% stake in New Britain Palm Oil Ltd (NBPOL). It did not give a reason.
“Following the expiry of the exclusivity period under the exclusivity agreement between Kulim and Sime Darby [signed] on Sept 28, Sime Darby has decided not to proceed further at this time on the proposed acquisition of Kulim’s shares in NBPOL,” said the conglomerate in a filing with Bursa Malaysia yesterday.
Shares of Sime Darby fell 0.33% to close at RM9.15 yesterday, while Kulim’s share price ended the day 2.99% lower at RM3.25.
Analysts had said the offer price for NBPOL would need to be above £5.50 (RM29.30) per share, based on Kulim’s previous partial offer for NBPOL, to be successful. As such, it was estimated that the proposed acquisition would have cost Sime Darby between RM4.9 billion and RM5.8 billion, or £6 or £7 per share, to acquire up to a 100% stake in NBPOL as a general offer was likely to be triggered.
According to sources, Sime Darby’s decision not to proceed with the deal was due to the valuations of NBPOL, among “other factors”.
However, a source close to the discussions said he does not rule out the possibility of Sime Darby relooking at the acquisition in the future.
“Sime Darby is still open to holding talks for mergers and acquisitions. But any deal will be done on a willing buyer, willing seller basis. If the price is right and the deal can create value for the company, why not [pursue it again]?” the source said.
Another source said cash-rich Felda Global Ventures Holdings Bhd (FGV) may now take the opportunity to pursue Kulim’s stake in NBPOL. When contacted, FGV’s head of global plantations Abdul Halim Ahmad declined to comment.
FGV was the first to express interest in acquiring the NBPOL stake from Kulim. Even though Sime Darby had been selected as the preferred party to negotiate for the proposed acquisition, FGV reportedly remained interested in the London-listed firm and that once the 60-day exclusivity agreement had lapsed, there was nothing to stop other bidders from emerging.
CIMB Research regional head of plantations Ivy Ng Lee Fang does not expect the latest outcome to impact Sime Darby.
“The market hasn’t really priced in the deal into Sime Darby’s share price or the group’s valuations as the parties had only entered into an exclusivity agreement,” she told The Edge Financial Daily yesterday.
“We [CIMB Research] have been neutral on this news from the beginning as the pricing for the sale was not announced. So, it was hard to gauge how Sime Darby would have benefited earnings-wise,” she said.
Ng, however, noted that Papua New Guinea (PNG) is a tough market to enter and as such, the proposed acquisition would have allowed Sime Darby to expand its palm oil business into PNG and marginally lower the age profile of its overall palm oil estates.
NBPOL produces palm oil exclusively in PNG and the Solomon Islands. It has 77,000ha of oil palm plantation, 12 palm oil mills and one refinery each in PNG and Liverpool in the United Kingdom.
The group is also the largest sugar and beef producer in PNG through its over 7,718ha of sugar cane plantations and 9,282ha of pastures. It also has seed production and palm breeding facilities.
This article first appeared in The Edge Financial Daily, on October 1, 2014.