KLK offers RM1.83bil for MP Evans Group Plc
It believes all-cash offer is highly-attractive to MP Evans holders
PETALING JAYA: Kuala Lumpur Kepong Bhd (KLK) is making an RM1.83bil cash offer to acquire MP Evans Group Plc, a British company with huge tracts of oil palm plantation land in Indonesia.
The public offer came after an earlier takeover attempt by KLK was rejected by MP Evans’ board of directors.
KLK said yesterday it is offering to buy out shareholders in MP Evans, which is listed on the London Alternative Investment Market, for 640 pence a share plus an interim dividend of 2.25 pence.
This is 51% higher than MP Evans last traded price of 426.25 pence on Oct 24, it said.
“KLK believes its all-cash offer is highly-attractive to MP Evans shareholders, representing a compelling value proposition with a high degree of certainty at a substantial premium to the current share price,” KLK said in a filing with Bursa Malaysia.
“This will also provide the shareholders the opportunity to realise their investment in the context of the low liquidity of MP Evans share trading.
“KLK also believes there’s a strategic merit in synergising the operations of MP Evans with KLK from the geographical and capabilities perspectives,” it said.
The board of directors at MP Evans had on Oct 13 rejected a similar offer by KLK. The public offer by KLK provides MP Evans shareholders the opportunity to decide on the merits of its offer on their own.
MP Evans assets consist of oil palm plantations (both majority and minority held) in Indonesia and residential property development in Malaysia.
In general, MP Evans has 26,600ha of majority-owned oil palm plantations, 8,100ha of associated smallholder co-operative oil palm plantations and 9,600ha still to plant on existing projects.
The group is expecting strong crop and revenue growth due to the young average palm age of 7.9 years.
Meanwhile, KLK’s oil palm tree age profile is considered prime.
Through consistent replanting in Malaysia and past expansions in Indonesia, KLK should see around 15,300ha maturing in 2016 through 2018, representing 9% of the group’s mature hectarage as at end-June 2016.
Also, KLK said that the management of MP Evans would like to develop their careers within the larger organisation.
“Together, KLK and MP Evans should establish best practices for the further growth of both companies and enable the enlarged group to capitalise on economies of scale in the oil palm sector,” it said.
According to AllianceDBS Research in a report yesterday, KLK is a vertically integrated producer, processor and merchandiser of palm oil products.
“More than two-thirds of its earnings before interest and taxes come from sales of crude palm oil (CPO), palm kernel and CPO trading, while around 20% comes from downstream products.
“Given its plantation segment’s dominant contribution, movements in CPO prices would generally affect the group’s profits more so than other integrated players,” said the report.
Meanwhile, KLK said its gearing is expected to increase to RM6.6bil from RM4.6bil due to this acquisition, while its gearing ratio is forecast to be up to 0.62 times from 0.44 times.