This article first appeared in The Edge Malaysia Weekly on December 27, 2021 - January 2, 2022

KUALA Lumpur Kepong Bhd’s (KLK) acquisition of a 56.2% stake in IJM Plantations Bhd from IJM Corp Bhd for RM1.53 billion, and its subsequent mandatory general offer (MGO) for the remaining 43.8% equity interest for up to RM1.2 billion, is our choice for best M&A deal this year as it represented a win-win for KLK and IJM Corp.

RHB Investment Bank Bhd, which acted as the sole principal adviser to KLK, said the deal was the largest acquisition by value undertaken by KLK since its IPO in 1974, and was in line with its long-term plan of expanding its plantation business. “Upon completion of the acquisition, KLK’s total oil palm planted area has risen 28.7% to 274,688ha, from 213,411ha at end-September 2020,” it added.

The purchase consideration for the 494.866 million shares, or 56.2% stake, in IJM Plantations of RM3.10 per share represented a premium of 31.36% over the last traded price of RM2.36 on June 8, 2021.

Following the completion of the acquisition on Sept 6, KLK’s direct shareholding in IJM Plantations went from nil to 56.2%. The group then made an MGO to acquire the remaining 385.71 million shares, or 43.8% stake. As at Nov 18, KLK held 835.575 million shares, or a 94.89% stake, in the company. The MGO is still ongoing, even though IJM Plantations was delisted in November.

AmInvestment Bank Bhd, which acted as the principal adviser to IJM Corp for the deal, said the disposal of its 56.2% equity interest in IJM Plantations to KLK represented an opportune window for divestment and was in line with the strategic objective of the company and its subsidiaries to focus on construction, property management, infrastructure concessions, manufacturing of building materials and quarrying.

“The deal allowed IJM Corp to monetise its investment in IJM Plantations at a 52% premium and the group is expected to record a pro forma gain of about RM699.89 million. Part of the proceeds from the disposal will be utilised for capital management activities to increase shareholder value,” it added.

“It was also a landmark deal with opportune timing, taking advantage of high crude palm oil prices that enabled IJM to cash out and refocus on its business.”

KLK’s holding company Batu Kawan Bhd also made a lucrative deal this year when it acquired Permodalan Nasional Bhd’s (PNB) entire 56.32% stake in Chemical Company of Malaysia Bhd (CCM) and subsequently made an unconditional mandatory takeover offer for the remaining CCM shares.

On Dec 11, 2020, KLK completed its acquisition of 94.45 million shares, or 56.32% equity interest, in CCM for RM3.10 per share, amounting to RM292.79 million.

Batu Kawan then made a mandatory takeover offer for the remaining 73.25 million shares, or 43.68% stake, at RM3.10 per share for a total of RM227.1 million. The takeover was completed on March 16, with CCM becoming a wholly-owned subsidiary of the company, in a deal valued at RM519.9 million.

CIMB Investment Bank Bhd, which acted as principal adviser to Batu Kawan, said the acquisition provided an opportunity for the group to acquire an established chemicals and polymers manufacturer, which would increase its market presence as a chlor-alkali chemicals manufacturer.

The offer price of RM3.10 per share was a premium of 27.5% and 53% to the 5-day and 1-month volume weighted average market price of the shares prior to the announcement of the acquisition and MGO respectively.

Maybank Investment Bank Bhd acted as the financial adviser to PNB for the deal.

The second notable mention is Malayan Flour Mills Bhd’s (MFM) disposal of its 49% equity interest in Dindings Supreme Sdn Bhd to Tyson International Holding Co for up to RM420 million, to be fully satisfied in cash and involved the granting of call options to Tyson.

Hong Leong Investment Bank Bhd, which acted as the principal adviser to MFM on the deal, said the disposal of 49% equity interest in Dindings, which is involved in the processing of halal-certified poultry products, to Tyson — one of the largest food companies in the world — is a strategic partnership that benefits both parties.

“It allows Tyson to participate as a strategic investor in Dindings to leverage MFM’s standards in halal-certified food production, while providing an opportunity for MFM to harness Tyson’s global distribution network and technical expertise in poultry integrated operations,” it added.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.