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Malaysia’s KLK offers $372m for majority stake in IJM Plantations
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alaysian palm oil giant Kuala Lumpur Kepong (KLK) Bhd has proposed to acquire IJM Corporation Bhd.’s entire stake in IJM Plantations Bhd. for 1.53 billion ringgit (US$371.72 million) in cash, the companies said on Wednesday.
IJM Corp said it had received a letter from KLK, one of the largest palm oil planters in the country, offering to acquire its 56.2 percent equity holding at 3.10 ringgit per share.
The construction group said it agreed in principle to finalize terms of the proposed acquisition with KLK.
“After having deliberated on the merits of the offer, the board is in principle agreeable to finalize the terms and conditions with KLK [...] for the execution of the sale and purchase agreement,” it said.
KLK said that upon execution of the agreement, it was obliged to extend a mandatory general offer to acquire the remaining IJM Plantations shares not already held by KLK.
Aside from the boards, the proposed acquisition is also subject to other shareholders’ approval at an extraordinary general meeting to be convened, as well as consent from lenders and authorities, KLK said. It confirmed having the financial resources to complete the deal.
IJM Corp’s potential disposal of its plantation division comes at an opportune time, capitalizing on a crude palm oil upcycle to fetch a higher valuation, MIDF Research analyst Khoo Zhen Ye said in a note earlier on Wednesday.
The offer, at a 26 percent premium to IJM Plantations’ last traded share price of 2.46 ringgit, values the palm oil producer at 2.73 billion ringgit. Analysts said the offer was reasonable.
Shares in IJM Plantations have surged 35 percent this year, giving it a market capitalization of 2.16 billion ringgit. The firm posted record profit in its 2021 financial year but was loss-making in the previous two financial years.
KLK has a total planted area of 223,964 hectares across Malaysia, Indonesia and Liberia. Acquiring IJM Plantation, which has a total planted area of 60,966 ha across Malaysia and Indonesia, could expand KLK’s planted area by around 27 percent and raise its palm oil production.
The deal will also give IJM Corp, which mainly deals with construction, property and infrastructure, an opportunity to strengthen its balance sheet in order to undertake mega construction and infrastructure projects, analyst Khoo said.
