KUALA LUMPUR (July 4): Sarawak Oil Palms Bhd (SOPB) has proposed the acquisition of another oil palm company in Sarawak and a two-for-seven rights issue.

The group said it has entered into an agreement with Shin Yang Holding Sdn Bhd to acquire its subsidiary Shin Yang Oil Palm (Sarawak) Sdn Bhd (SYOP) for RM873 million, comprising the purchase consideration of SYOP shares for RM284.4 million and the assumption of inter-company balances of RM588.6 million.

The group also intends to undertake a renounceable rights issue of up to 127.8 million shares to raise funds to part finance the proposed acquisition.

According to its filing with Bursa Malaysia today, SOPB said its board views the acquisition as being consistent with the group's plans to continue to expand its oil palm cultivation business by acquiring new land banks in Sarawak.

"SYOP has a land bank of approximately 47,000 hectares in Sarawak, comprising 23,798 hectares of planted oil palms and 6,772 hectares of plantable lands. Furthermore, SYOP has a fairly young crop profile, with young palms (four to 10 years of age) and prime palms (11 to 20 years of age) constituting approximately 72% of the total planted area," it said.

SOPB said the acquisition will enable it to strategically position itself to stay competitive in highly challenging market conditions.

The group believes the strategic value creation derived from the acquisition will translate into operational efficiency thus improving profitability.

"Leveraging on its established track record in estate management practices, SYOP intends to focus on upstream plantation activities of developing the remaining unplanted and immature planted area as well as maintaining the existing mature planted areas," said SOPB.

The group said funding for the proposed acquisition is expected to be financed by a combination of the proceeds from the rights issue, bank borrowings and internally generated funds.

Based on the indicative issue price of RM2.80 each for the rights shares, the rights issue is expected to raise gross proceeds of about RM357.72 million, it said.

SOPB's share price rose 3 sen or 0.73% to close at RM4.15 today, for a market capitalisation of RM1.83 billion.