Boustead Plantations saw a significant increase in its shares on Thursday following an offer from a key shareholder. This came after another company withdrew from a stake-acquisition deal. The stock rose by up to 11% during morning trade.
The armed forces pension fund of Malaysia announced that it would buy out Boustead at MYR1.55 per share, the same price that rival palm-oil planter Kuala Lumpur Kepong (KLK) had offered. Boustead’s shares resumed trading on Thursday after a two-day halt.
KLK, who had initially planned to acquire a 33% stake in Boustead Plantations in a deal worth $243.1 million, stated on Wednesday that the deal was called off due to the failure to meet one of the conditions by the cut-off date of October 6.
In a separate filing on Thursday morning, Boustead Plantations announced that the pension fund, known as LTAT, intends to proceed with the general offer at MYR1.55 per share. LTAT currently holds nearly 11% of the company.
The collapse of KLK’s offer is considered favorable for Boustead Plantations. Analysts believe that if the deal had gone through, it could have reduced the company’s net profit by 3%-5% due to high production costs. Additionally, KLK’s net gearing would have increased significantly. Therefore, analysts from AmInvestment Bank and Hong Leong Investment Bank agree that the deal would not have boosted KLK’s earnings in the near-to-medium term.
A note from analyst Chye Wen Fei highlights that approximately 45% of Boustead Plantations’ planted areas are old and in need of replanting soon.
At the time of writing, Boustead Plantations shares were 6.3% higher at MYR1.35, while KLK shares were up 0.3% at MYR21.54.