In a disclosure to Bursa Malaysia Securities (Bursa), Hap Seng Plantations Holdings Bhd (HSPB), one of the largest producers of sustainable palm oil in Sabah, East Malaysia, has declared its intention to acquire a majority stake in palm oil processor Kretam Holdings Bhd (KHB) for a total of MYR 1.18 billion (≈ US$300 million). The proposal is in line with HSPB's strategy to increase its total palm plantation landbank, planted area and extend downstream into edible oils and biofuels.
According to the February 21 disclosure statement, HSPB has entered into a “conditional share sale agreement” with Kretam’s controlling shareholder and CEO for the acquisition of a 33.5 percent stake in the company for MYR 716.99 million (≈ US$183 million). In addition, HSPB has entered into another conditional share sale agreement with Santraprise Sdn Bhd for the acquisition of another 21.5 percent in KHB for MYR 460.79 million (≈ US$117 million).
HSPB is principally involved in investment holding whilst its subsidiaries are principally engaged in the cultivation of oil palm and processing of fresh fruit bunches (FFB) into crude palm oil (CPO) at four oil mills.
KHB and its subsidiaries are involved in the cultivation of oil palm but also milling, refining, manufacturing and sale of palm oil products including edible oils, biofuels and fertilisers – KHB Group operate three oil mills and a 1 500 tonne per day capacity integrated palm oil refinery and biodiesel plant via its wholly-owned subsidiary Green Edible Oil Sdn. Bhd.
Assuming both deals go ahead, HSPB Group’s total palm plantation land bank and planted area will increase by 23 865 ha (≈ 59 percent) and 19 623 ha (≈ 54 percent), respectively while gaining a 55 percent majority shareholding in KHB. Both companies are in various stages of Roundtable on Palm Oil (RSPO) and Malaysian Sustainable Palm Oil (MSPO) certification.
KHB Group’s landbank and plantations are “strategically located” close to the HSPB Group’s existing estates, Maybank Investment Bank, the principal adviser to HSPB for the proposals, said. In addition, the proposed agreements are also expected to improve the age profile of the HSPB Group’s oil palm estates as the plantation lands of the KHB Group comprise mainly of oil palms estates that are within its prime age of between 11 to 19 years.
According to Maybank, the proposals are “in line” with HSPB’s objective to increase its plantation land bank and represents an “opportunity for the HSPB Group to pursue its long-term strategy.” It would also enable HSPB to extend downstream in the value-chain into the production and sale of edible oils and biodiesel while improving its overall operational efficiency.
