RM3.9bil deal for IOI
Plantation firm selling 70% in IOI Loders to US-based Bunge
PETALING JAYA: In a surprise move, IOI Corp Bhd has entered into a definitive sale and purchase agreement with United States-listed Bunge Ltd to sell a 70% controlling stake in IOI Loders Croklaan Group BV and its related businesses for a total cash consideration of RM3.94bil.
This consists of some 297 million euros (RM1.49bil) plus US$595mil (RM2.5bil), subject to adjustments to be determined at the transation close.
The proposed deal will see IOI Corp recording a gain on disposal of RM2.5bil. It is allocating 50% of the RM3.94bil in proceeds to pare down its debts over the next 24 months. It is also allocating some RM788.2mil for cash dividends, which it is looking to pay out over the 12 months.
Meanwhile, RM1.17bil is allocated for future investments.
Loders is an established leader in the growing US$33bil semi-specialty and specialty B2B oils market. Its portfolio includes the full range of palm and tropical oil-derived products with strength in confectionery, bakery and infant nutrition applications. Loders serves global food industry customers in more than 100 countries around the world and reported fiscal year 2016 revenue of US$1.6bil.
IOI Corp first acquired the entire business of Loders from Unilever Plc and Unilever NV for RM814mil cash back in 2002.
Combined with some other target companies which Loders is acquiring as part of the deal, IOI Corp’s cost of investment is approximately RM1.22bil. The financial debts of the target companies amounted to some RM1.25bil as of June 30, 2016,
On the selling price of RM3.94bil, the valuation is based on an enterprise value (EV) to earnings before interest, taxation, depreciation and amortisation (EBITDA) multiple (EV/EBITDA) of 13 times for the financial year ended June 30, 2016.
This is within the range of comparable companies within the region. For instance, Wilmar International Ltd has an EV/EBITDA of 12.4 times.
IOI Corp was up only two sen to RM4.55 yesterday. On a year-to-date basis, the stock is up 3.41% at its market capitalisation of RM28.59bil. The stock is trading at a historical 39 times price earnings ratio.
In a statement, IOI Corp said that with the transaction, Loders would, in combination with Bunge, be part of a global agri-food company with differentiated and comprehensive product offerings based on both tropical and seed oils, and world-class formulation and application capabilities.
“During the 14 years since IOI acquired Loders, Loders has grown from having three processing plants to seven plants in Europe, North America and Asia, and earnings have nearly quadrupled
during this period.
“IOI has positioned Loders as a leading palm-based specialty fats player which supplies its products to nearly all major MNC food companies. In order to sustain its significant growth and better serve its multinational customers, Loders will need to expand its processing plant footprints to regions such as South America and South Asia, and offer more varied product offerings, including seed oil–based products.
“In IOI’s assessment, the faster and more effective way to do so is by leveraging on Bunge’s existing plant assets in these regions and Bunge’s established integrated supply chain in seed oils,” it said.
Soren Schroder, Bunge’s chief executive officer (CEO), said that this deal was a compelling transaction for Bunge.
“It delivers on our stated objective to expand our value-added business by accelerating our growth in B2B semi-specialty and specialty oils. Together with Loders, we will have a comprehensive product offering derived from seed and tropical oils, with leading innovation, application capabilities and sustainability programmes. This complete seed and tropical oil portfolio will position Bunge to be a full service partner and uniquely able to help our customers innovate and grow for the future.”
Bunge is a leading global agribusiness and food company operating in over 40 countries with approximately 32,000 employees. Bunge buys, sells, stores and transports oilseeds and grains to serve customers worldwide. Founded in 1818, the company is headquartered in White Plains, New York.
In a statement, IOI Corp CEO Datuk Lee Yeow Chor said that after the transaction, IOI would still play an important role in Loders, given its expertise in palm oil sourcing and business experience in the fast-growing Asia-Pacific region.
“IOI will have two representatives on Loders’ five-member board of directors and our representatives will also be involved in key management decisions taken by Loders.
“IOI will continue to be a major supplier of palm oil and palm products to Loders after the transaction. In this respect, IOI will maintain our strong sustainability commitments as spelled out in IOI Group’s Sustainable Palm Oil Policy,” said Lee.
The proposed disposal is expected to be completed by the fourth quarter of 2018, and is not expected to have any material impact on the earnings of the group for June 30, 2017.
Lucrative deal: IOI Loders Croklaan Oils Sdn Bhd plant in Pasir Gudang. The proposed deal will see IOI Corp posting a gain of RM2.5bil.