KUALA LUMPUR: Singapore-listed Wilmar International Ltd has agreed to pay RM50 million for Kulim (Malaysia) Bhd’s Nexsol (Malaysia) Sdn Bhd, which owns a biodiesel and glycerine refinery in Johor Baru and the 30-acre (12.1ha) land the refinery sits on.

Wilmar, via its wholly-owned subsidiary PGEO Group Bhd, is paying RM27 million for Nexsol, while its other unit PGEO Edible Oils Sdn Bhd will pay RM23 million for a 30-acre tract in Sungai Tiram, said Wilmar in a statement yesterday.

“This acquisition represents a strategic addition to Wilmar’s olechemicals manufacturing capabilities, creating synergies with the company’s oleochemical infrastructure and strengthening its position in the supply chain,” Wilmar, PPB Group Bhd’s associate and largest earnings contributor, added.

Wilmar expects the Nexsol acquisition to be completed within 90 days from the signing of the share purchase agreement yesterday and the acquisition of the land within nine months from the land transfer agreement.

It will fund the acquisition via internal sources and does not expect the investment to have material impact on its earnings for the current financial year ending Dec 31, 2014 (FY14).

Meanwhile, Kulim expects the two disposals to book RM4.2 million in one-off gains.

In a filing with Bursa Malaysia, Kulim said the amount is not expected to have a material impact on its net asset per share and gearing for FY14.

For the Nexsol disposal, Kulim expects to record a RM4.3 million loss on disposal based on the RM31.3 million that Nexsol is carrying in its books after adjusting for “the capitalisation of advances”.

Kulim’s original cost of investment in Nexsol was RM134.2 million made on April 30, 2010.

The biodiesel and glycerine refinery is not in operation and “would require further capital and refurbishment expenditure to bring the facility to run at optimal levels”, Kulim said.

Nexsol incurred a RM12 million net loss on revenue of RM46 million for the financial year ended Dec 31, 2013, with a total shareholder deficit of RM86.2 million.

Nexsol’s refinery curently occupies seven acres of the 30-acre site.

Kulim expects to realise a RM8.5 million one-off gain from the land sale, and plans to use the proceeds for working capihalimtal.

The leasehold land, which expires in January 2068, carried a value of RM14.5 million as at Dec 31, 2013 and was acquired by Kulim in December 2005 for RM26.2 million.

Kulim shares shed 1.79% to close at its intraday low of RM3.29 yesterday, while Wilmar’s stock rose 0.64% to close at S$3.16 (RM7.97).

This article first appeared in The Edge Financial Daily, on August 28, 2014.