MARKET DEVELOPMENT
Kulim Defends Bid To Raise NBPOL Stake
Kulim Defends Bid To Raise NBPOL Stake
17/08/2013 (The Star) - In a lengthy reply to the independent directors of New Britain Palm Oil Ltd (NBPOL), Kulim (M) Bhd has sought to defend its partial offer to enlarge its current holdings of 48.97% in NBPOL to 68.97%.
To recap, Kulim had in June announced a partial general offer for the shares of NBPOL to raise its shareholding in NBPOL by 20% to 68.97%. The offer, if accepted, would make NBPOL a subsidiary of Kulim, which would then become a pure plantation player.
Last week, the independent directors of NBPOL recommended that shareholders reject Kulim’s offer in the target company statement, within which the independent adviser BDO LLP also concluded that the offer was “not fair and reasonable”.
In a statement to Bursa Malaysia yesterday, Kulim voiced its disagreement with the conclusion in the statement.
“The offer price of £5.50 (RM28.18) per NBPOL share represents a premium of approximately 25.3% and 36.1% to the volume weighted average price of the depositary interests on the London Stock Exchange (LSE) during the 30-day and 60-day trading periods ending on June 19, 2013 (being the last trading day prior to the announcement of the offer) of £4.39 and £4.04, respectively,” it justified.
It added that the offer price also represented a premium of 14.6% to the closing price of £4.80 per depositary interest on the LSE on June 19, 2013.
Kulim argued that BDO had assessed the fair market value of an NBPOL share as being in the range of £6.50 to £7.00 or PGK 22.04 (RM32.24) to PGK 23.74, based on a discounted cash flow calculation which “relied on a number of questionable assumptions”.
The group pointed out that BDO had assumed that crude palm oil prices would increase linearly from US$845 (RM2,769) per tonne in 2013 to a long-term price of US$1,100 per tonne by 2021.
It noted that BDO had also used a low weighted average cost of capital (WACC) base case of 9%, while Kulim believes a higher WACC should have been used.
Other issues raised were BDO’s “misguided” market valuation approach using comparable company valuations to support its conclusion concerning the fair market value of NBPOL shares.
To recap, Kulim had in June announced a partial general offer for the shares of NBPOL to raise its shareholding in NBPOL by 20% to 68.97%. The offer, if accepted, would make NBPOL a subsidiary of Kulim, which would then become a pure plantation player.
Last week, the independent directors of NBPOL recommended that shareholders reject Kulim’s offer in the target company statement, within which the independent adviser BDO LLP also concluded that the offer was “not fair and reasonable”.
In a statement to Bursa Malaysia yesterday, Kulim voiced its disagreement with the conclusion in the statement.
“The offer price of £5.50 (RM28.18) per NBPOL share represents a premium of approximately 25.3% and 36.1% to the volume weighted average price of the depositary interests on the London Stock Exchange (LSE) during the 30-day and 60-day trading periods ending on June 19, 2013 (being the last trading day prior to the announcement of the offer) of £4.39 and £4.04, respectively,” it justified.
It added that the offer price also represented a premium of 14.6% to the closing price of £4.80 per depositary interest on the LSE on June 19, 2013.
Kulim argued that BDO had assessed the fair market value of an NBPOL share as being in the range of £6.50 to £7.00 or PGK 22.04 (RM32.24) to PGK 23.74, based on a discounted cash flow calculation which “relied on a number of questionable assumptions”.
The group pointed out that BDO had assumed that crude palm oil prices would increase linearly from US$845 (RM2,769) per tonne in 2013 to a long-term price of US$1,100 per tonne by 2021.
It noted that BDO had also used a low weighted average cost of capital (WACC) base case of 9%, while Kulim believes a higher WACC should have been used.
Other issues raised were BDO’s “misguided” market valuation approach using comparable company valuations to support its conclusion concerning the fair market value of NBPOL shares.