Saturday, April 13

LTAT’s stake sale to KLK fails, Boustead must return the RM229 million deposit

Armed Forces Fund Board (LTAT) and Boustead Holdings Bhd (Boustead) had planned to sell a 33 percent stake in Boustead Plantations Bhd (BPlant) to Kuala Lumpur Kepong Bhd (KLK), but that deal has fallen through.

This was stated by BPlant and KLK in separate filings, confirming a report published by The Edge on Tuesday, October 3.

The strategic collaboration agreement (SCA) signed by KLK, Boustead, and LTAT states that a condition antecedent “will not be satisfied by the cut-off date of October 6, 2023,” according to information provided to KLK.

“In the circumstances, the parties mutually agree that the SCA shall be terminated with immediate effect on Oct 4, 2023,” it said.

“As a result of the termination, Boustead shall return the deposit (equivalent to the sum of RM229.15 million) to KLK within 14 business days from Oct 4, 2023, or such other later date as may be agreed between the parties,” KLK added.

Both KLK and BPlant stated that it is not anticipated that the termination of the SCA will materially affect their respective firms’ earnings, earnings per share, net assets, or net assets per share for the current fiscal year.

After being suspended for two days on Tuesday and Wednesday, their shares will start trading again on Thursday, October 5.

Recall that the agreement called for the sale of LTAT and Boustead’s 33 percent ownership in BPlant for RM1.15 billion, or RM1.55 per share.

As of right now, KLK owns a direct 3.09 percent interest in BPlant after purchasing 6.11 million shares on September 29.

According to the agreement, KLK intended to increase its stake to 65% by extending a required general offer at RM1.55 per share for BPlant, and then delist the business after that. The remaining 35 percent would have been owned by LTAT and Boustead when the now-defunct exercise was finished.

The BPlant-KLK proposal was made only a few months after LTAT took Boustead private to hasten the restructuring of the company’s debt, which as of the end of March totaled RM6.76 billion.

This consisted of RM565.8 million in cash and RM2.778 and RM3.986 billion in long- and short-term borrowings, respectively.

Improvements in Boustead will benefit LTAT’s position since the armed forces fund reported in July that 39 percent of its portfolio was allocated to investments relating to Boustead. The armed forces fund increased its dividend payment in March from RM379.4 million or 4.1 percent for 2021 to RM476.45 million or 5 percent for 2022.

The Ministry of Finance has this week granted RM300 million to help LTAT solve its liquidity challenges, and by year’s end, the Prime Minister Datuk Seri Anwar Ibrahim stated he was looking for a total of RM2 billion to “save” LTAT. Anwar announced the financial support at the Felda Segalanya event launch at Felda Chemomoi in Teriang, Pahang, and was quoted in news sources as adding that the money will help LTAT avoid losses.

On June 12, LTAT completed the acquisition of Boustead, valuing the company at RM1.73 billion after paying RM702.3 million for the remaining 40.58 percent of the company. In comparison to the purchase price of 85.5 sen, Boustead had net tangible assets of RM1.60 per share at the time.

The market capitalization of BPlant dropped 13 perccent to RM1.27 on Monday due to speculation regarding the cancellation of the stake sale to KLK.

Prior to that, BPlant shares had been steadily rising from a low of 64 sen a share since June on reports that Boustead was getting ready to sell the plantation arm. Following the release of KLK’s takeover bid on August 28, the counter increased to its most recent closing high of RM1.52.

The group was valued at RM23.22 billion when KLK shares last ended unchanged at RM21.48 on Monday. Bloomberg data show that while its share price has increased by 9.69 percent over the past year, it has decreased by 3.94 percent over the past year.

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