Kulim buying majority stakes in 4 Indonesian firms

PETALING JAYA: Kulim (M) Bhd is buying majority stakes in four mid-sized oil palm plantation companies in Indonesia from three companies there in a RM509.3 million all-cash deal.
On Feb 20, Kulim's 74.0% owned subsidiary, PT Wisesa Inspirasi Nusantara, entered into four conditional share purchase agreements that involved the acquisition of 95.0% equity interests in each of the four target companies, namely PT Nusa Persada Indonesia, PT Surya Panen Subur, PT Tempirai Palm Resources and PT Rambang Agro Jaya.
Kulim said the deal is made up of a RM242.89 million payment for the stakes and the settlement of outstanding shareholders' loans and advances amounting to RM266.46 million. It will finance the proposed acquisition by a combination of bank borrowings and/or internally generated funds.
Kulim said the acquisitions are in line with its business direction to expand its plantation landbank and gain larger market access in Indonesia.
As at Dec 31, 2015, the total landbank held by the target companies and PT Nusa Persada Indonesia's four subsidiaries are 104,904 ha of Ijin Usaha Perkebunan (IUP), of which 82,785 ha are under Hak Guna Usaha and 34,382ha already planted.
"The proposed acquisitions will increase the Kulim group's total cultivated plantation landbank from its present 47,010ha (excluding the 40,645ha, which is currently under IUP status in Central Kalimantan Indonesia) to 81,392ha.
It added that the total mature area of the target companies and PT Nusa Persada Indonesia's subsidiaries as at Dec 31, 2015 is about 11,953ha, constituting only about 15% of the total plantable area under their plantation landbank.
The group said it expects to incur additional expenditure for the development of the plantation assets and operating expenditure for the cultivation of oil palms of the target companies, including rehabilitation cost, land compensation and capital.
"In view of this, it is expected that it will take few years before the plantation matures and reach their prime age, and contribute to the earnings of the Kulim Group," it said.
The group expects the proposed acquisitions to enhance its earnings in the long term when the overall market conditions improve along with the price of crude palm oil.