RM3.9bil deal for IOI

Plan­ta­tion firm sell­ing 70% in IOI Loders to US-based Bunge

The Star Malaysia - StarBiz - - Front Page - By TEE LIN SAY lin­say@thes­tar.com.my

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.

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