This article first appeared in The Edge Financial Daily on February 13, 2020 - February 19, 2020

KUALA LUMPUR: Genting Plantations Bhd (GENP) and Elevance Renewable Sciences Singapore Pte Ltd (ERS Singapore) have mutually agreed to terminate a share sale and purchase agreement (SPA) signed in July 2014.

The termination will see ERS Singapore transferring to GENP its entire 25% stake in Genting Integrated Biorefinery Sdn Bhd (GIB) for RM72 million cash.

“GENP will pay ERS Singapore a net amount of RM64 million after setting off RM8 million owing by ERS Singapore for the initial share sale under the share SPA against the said consideration of RM72 million,” said GENP in a bourse filing yesterday.

Concurrently, other existing agreements between GENP and its subsidiaries, and ERS Singapore and its parent US-based Elevance Renewable Sciences Inc will also be unwound, amended or terminated.

GENP said Elevance is undergoing a restructuring exercise and has informed GENP that it would not undertake any further capital commitment for the construction of a metathesis plant in Lahad Datu, Sabah.

“In view of this, it is in the GENP’s best interest that Elevance exits as shareholder of GIB under the proposed transactions but to remain in the role of licensor for the metathesis licence,” it added.

On completion of the proposed transactions, GIB will become a wholly-owned subsidiary of GENP and will continue to hold the metathesis licence.

“Thus, GIB will have the flexibility to pursue the metathesis plant in future and to collaborate with other strategic partners to venture into higher value-added product streams,” said GENP.

The US$28.05 million (RM89.48 million) metathesis plant refers to GIB’s existing 200,000-tonne biodiesel plant located at the Palm Oil Industrial Cluster in Lahad Datu, which will be transformed to produce high value palm oil derivatives using Elevance’s metathesis technology.

The initial intention of the strategic collaboration was to enable GENP to vertically integrate into high value-added downstream activities to diversify its income base and reduce dependency solely on the cyclical nature of its upstream plantations business.

GENP said it will fund the proposed transactions from internal funds.

The net profit and net asset for GIB stood at RM1.4 million and RM262.46 million respectively for the financial year ended Dec 31, 2018.

Elevance’s current major shareholders are private equity corporation Naxos and Genting Bhd, each holding 48.1% and 47.8% stake respectively. Accordingly, Genting is deemed interested in the proposed transactions.

The proposed transactions are expected to be completed by the first quarter of this year.