KUALA LUMPUR (Oct 3): The proposed disposal of a 33% stake in Boustead Plantations Bhd (BPlant) by the Armed Forces Fund Board (LTAT) and Boustead Holdings Bhd to Kuala Lumpur Kepong Bhd (KLK) has fallen through, sources told The Edge.

The deal would have seen LTAT and Boustead receive RM1.15 billion from KLK for the 33% stake, as Boustead races to address its short-term debt obligations which totalled RM3.99 billion at end-March.

KLK, LTAT and Boustead had already extended twice the deadline for the cut-off date of the strategic collaboration agreement (SCA) inked between the three parties, first from Sept 11 to Sept 22, and later to Oct 6 (Friday).

Shares of BPlant fell as much as 27 sen or 18.49% to RM1.19 in the morning session on Monday, before settling at RM1.27, still down 19 sen or 13.01%. It was the ninth most active counter on Bursa Malaysia, with 46.67 million shares traded. KLK shares closed eight sen or 0.37% higher at RM21.48.

Both LTAT and KLK declined to comment when contacted.

The stake sale, excluding two parcels of land in Penang and Selangor which could be carved out by LTAT for future property developments, was first proposed on Aug 24 and valued BPlant at RM1.55 per share or RM3.47 billion.

Reports that Boustead was preparing to dispose of the plantation arm had sent BPlant shares on a steady climb from a low of 64 sen apiece since June. The announcement of KLK’s offer lifted the counter to a high of RM1.52 on Aug 28.

Under the offer, KLK had planned to extend a mandatory general offer at RM1.55 a share in order to raise its shareholding to 65%, and to subsequently delist the company. The company currently holds a direct 3.09% stake in BPlant, following its last acquisition of 6.11 million shares on Sept 29.

LTAT and Boustead, meanwhile, would hold the remaining 35% in BPlant, compared with the 68.01% they have now — 10.59% under LTAT and 57.42% under Boustead.

The proposal was seen as a good deal for LTAT, considering BPlant’s below average fresh fruit bunch (FFB) yield and how KLK planned to fund the replanting costs required for half of BPlant’s plantations, which some estimated would be around RM150 million annually for several years.

In the first six months ended June 30 of its financial year 2023 (1HFY2023), BPlant booked a net loss of RM304,000 compared with the net profit of RM508.38 million it made in 1HFY2022, as revenue fell 40.43% to RM400.98 million from RM673.11 million with the normalisation of crude palm oil prices.

The government, meanwhile, has allocated RM300 million this week to help LTAT address its liquidity issues, and is looking for a total of RM2 billion by year end to "save" LTAT.

The money would help LTAT avoid losses, Prime Minister Datuk Seri Anwar Ibrahim was quoted as saying in news reports on Monday, as he revealed the financial support at the launch of the Felda Segalanya event at Felda Chemomoi, Teriang, Pahang.

It remains to be seen if there will be another buyer with a similar offer for BPlant. 

When explaining the proposal to the Dewan Rakyat, Defence Minister Datuk Seri Mohamad Hasan said 15 parties ― including Sime Darby Plantations Bhd, Tabung Haji, Tradewinds Corp and FGV Holdings Bhd ― were invited to submit their offers under a three-month bidding period, but many declined to participate while those who did mostly made too low of an offer.

Boustead, Mohamad Hasan told Dewan Rakyat on Sept 18, needs “RM800 million by year-end, and another RM1.7 billion to redeem their Islamic Medium-Term Notes (IMTN)”.

The BPlant-KLK proposal came just months after LTAT took Boustead Holdings private to accelerate the latter’s debt restructuring. LTAT paid RM702.3 million or 85.5 sen per share for the remaining 40.58% stake in Boustead in a deal that valued the conglomerate at RM1.73 billion.

Aside from BPlant, LTAT and Boustead own 54.96% of Practice Note 17 outfit Pharmaniaga Bhd and 48.7% in Affin Bank Bhd.

It also holds a 73.16% stake in Boustead Heavy Industries Corp Bhd, which just recently disposed of its troubled littoral combat ship (LCS) contractor Boustead Naval Shipyard Sdn Bhd (BNS) to the Ministry of Finance for RM1.

There are talks that LTAT and Boustead are in discussion for a new substantial shareholder to buy into Pharmaniaga, which supplies medicine to government hospitals but is facing balance sheet issues after its huge RM552.3 million impairment earlier this year on its Covid-19 vaccines stockpile.

Boustead has a slew of other assets, including The Curve shopping mall (RM573 million) and Menara UAC (RM92 million) in Mutiara Damansara, as well as Menara Affin (RM124 million)) in Kuala Lumpur. It also owns the University of Nottingham building in Semenyih, valued at RM236.5 million, and a 66% stake in the education group’s Malaysian arm.

At end-March, Boustead had short-term borrowings of RM3.99 billion and long-term borrowings of RM2.78 billion. Its long-term debt includes the IMTN, of which RM1.65 billion are maturing in 3Q2024. The group has also issued RM626.4 million in perpetual sukuk.

For LTAT, improvements in Boustead will be positive to its own position, considering that over one-third of its assets are located in the conglomerate. In March this year, the armed forces fund paid RM476.45 million in dividends or a rate of 5% for 2022, up from 2021's RM379.4 million or 4.1%.