KUALA LUMPUR (Jan 8): Kuala Lumpur Kepong Bhd (KLK) is disposing of a 20% equity interest in its wholly-owned subsidiary, KLK Premier Capital Ltd (KLKPCL), for US$44 million or RM154 million, cash.
In a filing with Bursa Malaysia, KLK said it, together with KLK Premier Capital, signed a share purchase agreement today to dispose of KLK's 20% equity interest to its long-time Japanese partner, Mitsui and Co Ltd.
“Mitsui shall acquire from KLK, 2.36 million shares and 84,500 redeemable preference shares (RPS) in KLK Premier Capital,” said the plantation giant, adding that its cost of investment in the unit was US$54.06 million, since Sept 12, 2013.
For the financial year ended Sept 30, 2014, KLK Premier Capital's net assets was US$95.5 million, with a net profit of US$1.1 million. KLK said the net assets of KLK Premier Capital will subsequently be reduced to US$52.7 million by converting a part of its net assets into a KLK shareholder’s loan.
“As Mitsui is KLK’s long-term business partner, the proposed disposal will allow KLK to leverage on Mitsui’s business/marketing relationships in the PRC (People's Republic of China) and technological expertise in oleochemical downstream manufacturing activities,” said KLK.
KLK Premier Capital owns 100% equity interest in Taiko Palm-Oleo (Zhangjiagang) Co Ltd (TPOZ), which is primarily in the manufacturing and trading of fatty acids, glycerine, soap noodles and triacetin.
The proposed disposal is conditional, among others, upon the injection of US$50.3 million by KLK/KLK Premier Capital into TPOZ, to fund the latter’s expansion of its plant capacity and product range.
It is also conditional upon the capitalisation of an existing KLK shareholder's loan of up to US$9.913 million, which is the equivalent of 9.913 million ordinary shares with a par value of US$1 each in KLK Premier Capital, followed by the subscription of an additional 1.9 million shares of the same par value by KLK in KLK Premier Capital.
This means prior to the completion of the proposed disposal, KLK shall have 11.81 million ordinary KLK Premier Capital shares and 422,500 RPS.
On the completion of the disposal, KLK shall manage KLK Premier Capital and TPOZ by providing technical advice, operation of plants and manufacturing of products in TPOZ.
Mitsui, on the other hand, shall then assist in promoting the sale of TPOZ’s products to Japanese companies operating in China, as well as assist in the transfer of technology owned by chemical manufacturers in Japan to TPOZ.
The deal is expected to be completed in the first quarter of this year, or on any other date mutually agreed upon.
It is expected to result in a gain before tax to KLK of approximately US$33.3 million. However, the deal will not have any material effect on its earnings, net assets or gearing as it will only be accounted as an equity transaction, said KLK.
At 2.30pm, KLK was trading at 48 sen or 2.2% higher at RM22.28, giving it a market capitalisation of RM23.72 billion.
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