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Thursday, August 8, 2013

Malaysia's Kulim offer to takeover New Britain Palm Oil snubbed


PETALING JAYA: The independent directors of London-listed New Britain Palm Oil Ltd (NBPOL) have come out strongly to advise shareholders to reject the takeover bid byKulim (Malaysia) Bhd, saying the offer was not fair or reasonable.
“The independent directors of NBPOL are of the view that the negative aspects of the offer far outweigh any advantages the offer provides,” the directors said in a statement, adding that they were recommending the offer be rejected.
To recap, Kulim, a long-time major shareholder of NBPOL, had in June launched a partial general offer for the shares in NBPOL, a large palm oil producer in Papua New Guinea (PNG).
The idea was to raise Kulim’s shareholding in NBPOL by 20% to 68.97%, making the latter a subsidiary, and thereby nudging Kulim toward becoming a pure plantation player.
Kulim is a subsidiary of Johor Corp (JCorp) and NBPOL is seen as one of the prized assets of JCorp.
Kulim’s general offer for NBPOL was priced at £5.50 (RM27.47) per share to be paid in cash. The price was at a premium of 25.3% to the volume weighted average price of NBPOL over the last 30 trading days.
The buyout price was also more than 14% above NBPOL’s share price on June 19, the day before Kulim made its bid.
However, the independent directors of NBPOL said the offer “significantly undervalues NBPOL’s shares. It is more than 15% below the low end of the fair market value range for NBPOL shares as determined by the independent adviser”, the directors stated.
And as it was a partial offer, Kulim’s acceptances are only for the 20% more shares in NBPOL. This, in turn, was another issue the independent directors highlighted.
“Depending on the level of acceptances, an acceptance by a NBPOL shareholder… may be scaled back, which means NBPOL shareholders who wish to take this opportunity to exit their investment in NBPOL can have no certainty that they will be able to do so entirely”, they said.
The independent directors also stated that an acceptance of Kulim’s offer could reduce the trading liquidity in NBPOL shares due to the reduction of the free-float.
“In this event, NBPOL shares will be less attractive to investors, potentially resulting in a lower value for NBPOL shares.”
They also said that accepting the offer would mean a shareholder would not be able to benefit from NBPOL’s growth opportunities, including benefits from any future increases in palm oil prices.
Incidentally, NBPOL has been hit by falling crude palm oil prices, which, in turn, has seen its stock price take a beating.
The directors also warned of a risk of being delisted from the London Stock Exchange if the offer was fully accepted, although they did not specify what particular listing requirements they were referring to. Lastly, the directors raised the prospect of possible changes to the operations of NBPOL if the offer was accepted.
Shareholders of NBPOL have until Aug 28 to decide if they wished to accept Kulim’s offer.
NBPOL has over 78,000ha of oil palm plantations, a further 10,000ha under preparation for oil palm, over 7,700ha of sugar cane and a further 9,200ha of grazing pasture; 12 oil mills; two refineries, one in PNG, and one in Liverpool, the United Kingdom, as well as a seed production and plant breeding facility. It is listed both in London and PNG.
Rumours of a corporate exercise involving NBPOL has often cropped up. In the past, there was talk of a management buyout.
And more recently, it had been speculated that Kulim’s ultimate intention may still be to privatise NBPOL, with the partial general offer being a first step toward that direction.
It will be interesting to see how far Kulim gets with this current offer, considering what the independent directors have come out to say.

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