Malaysia's KLK offers $372mn for majority stake in IJM Plantations

KUALA LUMPUR: Malaysian 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 ($371.72 million) in cash, the companies said on Wednesday.

IJM Corp said it has received a letter from KLK, one of the largest palm oil planters in the country, offering to acquire its 56.2% equity holding at 3.10 ringgit per share.

The construction group said it has agreed in principle to finalise terms of the proposed acquisition with KLK.

"After having deliberated on the merits of the offer, the board is in principle agreeable to finalise the terms and conditions with KLK ... for the execution of the sale and purchase agreement," it said.

KLK said upon execution of the agreement, it is 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 it has the financial resources to complete the deal.

IJM Corp's potential disposal of its loss-making plantation division comes at an opportune time, capitalising 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% 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% this year, giving it a market capitalisation of 2.16 billion ringgit.

But the firm has been loss-making over the past two financial years and its revenue contribution to IJM Corp has stayed around 11%, according to IJM Corp's annual report.

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 hectares across Malaysia and Indonesia, could expand KLK's planted area by around 27% 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.