This article first appeared in The Edge Malaysia Weekly, on December 21 - 27, 2015.
KULIM (M) BHD’S sale of New Britain Palm Oil Ltd (NBPOL) to Sime Darby Bhd, which was largely in Kulim’s favour, wins the award for the best merger and acquisition deal due to a number of reasons.
Firstly, the timing of the deal was good — it was concluded when crude palm oil prices were weakening and headed for a downward trend. Notwithstanding the softening CPO prices, Kulim managed to get an 85% premium on NBPOL’s closing price on the London Stock Exchange from Sime Darby, as it is rare for such a quality and sizeable asset to come into the market.
Sime Darby offered Kulim RM2.75 billion for its 49% stake. Meanwhile, Kulim proposed to reward its shareholders and pay RM1 billion (78 sen per share) in dividends, staggered over a two-year period.
Kulim announced that another RM850 million would be utilised to either grow its existing businesses or acquire other fundamentally strong assets with growth prospects. The company also plans to use RM600 million to pare down its borrowings, and RM300 million for working capital.
To recap, NBPOL has close to 80,000ha of planted oil palm, more than 7,700ha of sugar cane plantation and 9,200ha of grazing pasture. Its plantation business has among the highest yields in the world and is 100% certified by the Roundtable on Sustainable Palm Oil, which adds to its appeal.
NBPOL also owns 12 oil mills, two refineries — in Papua New Guinea (PNG) and Liverpool, the UK — and a plant breeding and seed production facility. The company’s 20,375 head of cattle make it PNG’s largest beef producer.
Kulim’s adviser, RHB Investment Bank Bhd, ran a competitive auction process and achieved a great result for both its client and the minority shareholders of NBPOL.
According to news reports, the bidders for Kulim’s stake in NBPOL were a star-studded cast. Apart from Sime Darby, they were Singapore’s Wilmar International Ltd, Indonesian plantation outfits Sinar Mas Group and RGE Group as well as Felda Global Ventures Holdings Bhd, IOI Corp Bhd and Kuala Lumpur Kepong Bhd.
The sale also bags the top prize due to the multiple jurisdictions — and high execution risks — involved. RHB had to understand the rules of PNG’s Port Moresby Stock Exchange and the London Stock Exchange, not to mention the requirements of Bursa Malaysia. It also had to obtain the green light from the European Union.
Just a year before selling NBPOL to Sime Darby, Kulim had sought to increase its shareholding in the company by 20% and offered RM812.3 million in total, but its plan was thwarted by the Securities Commission of PNG and National Court of PNG.
As at mid-December, Kulim’s share price has gained more than 40%. It hit a record high of RM3.93 on Nov 17.
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