KUALA LUMPUR (Aug 27): Kuala Lumpur Kepong Bhd (KLK) on Thursday (Aug 24) announced a plan to acquire a 33% stake plus one share in Boustead Plantations Bhd, buying the shares from the Armed Forces Fund Board (LTAT) and its flagship, the recently privatised Boustead Holdings Bhd (BHB).

In a nutshell, KLK will pay a generous RM1.55 per share or RM1.15 billion in cash to LTAT and BHB and undertake a mandatory general offer. The plan is for KLK to own 65% of Boustead Plantations while LTAT and BHB will control the remaining 35%.

For LTAT and BHB, the RM1.15 billion cash will come in handy, as the Armed Forces Fund Board grapples with debts and underperforming assets, including its pharmaceutical arm Pharmaniaga Bhd that has been languishing in the cash strapped PN17 category.     

KLK’s offer price nudged Boustead Plantations stock to record highs of RM1.51, a level never reached since its floatation exercise in June 2014. KLK, as the majority shareholder with a 65% stake, will also have to carry the baby, forking out hundreds of millions for replanting exercises, as 46% of Boustead Plantations’ trees are above 20-years-old.

While LTAT has snagged a good deal, for KLK, it gives the plantation giant an opportunity to rebalance its portfolio and increase its domestic plantations to 379, 274 ha, making up 53% of its total plantation assets. Previously, KLK’s Malaysian operations comprised about 40% of its total plantations.

KLK, among the world’s largest plantation companies, will take the lead and run Boustead Plantations while LTAT and BHB piggyback on it.

Read more on government-lnked investment companies on the merger and acquisition trail in the Aug 28 issue of The Edge Malaysia weekly.

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