KUALA LUMPUR: IOI Corp Bhd is divesting a 70% stake in its wholly-owned specialty oils and fats manufacturing arm Loders Croklaan Group BV and related businesses for about RM4bil in cash.
The proposed sale, for an indicative consideration of US$595mil (RM2.5bil) plus 297 million euros (RM1.5bil) (subject to adjustments), is to a unit of global agribusiness and food company Bunge Ltd.
In a filing with Bursa Malaysia, IOI Corp said the strategic collaboration with the New York-listed Bunge, which has operations in more than 40 countries, would allow Loders to leverage on the size of Bunge’s operations, established business network and expertise.
At the same time, IOI will be able to unlock partially the value of its investment in the Loders group. It expects to record a gain of RM2.51bil from the proposed sale and from the re-measurement of its remaining 30% stake.
The proceeds from the sale will be used to repay borrowing (RM1.97bil) as well as for future investment opportunities/working capital (RM1.17bil). Some RM788.2mil will be set aside as cash dividend to shareholders (which translates into a dividend per share of 13 sen).
As part of the conditions precedent of the share purchase agreement inked by IOI and Bunge’s unit on Tuesday, IOI must complete an internal restructuring prior to the completion of the proposed disposal.
This entails Loders acquiring IOI Corp’s units IOI Lipid Enzymtec Sdn Bhd (a specialty fats maker) and IOI Edible Oils (HK) Ltd (owner of a specialty oils and fats plant being built in Xiamen, China).
IOI said the disposal consideration was arrived on a “willing-buyer willing-seller basis” after taking into consideration, among others, the enterprise value to earnings before interest, taxation, depreciation and amortisation (Ebitda) multiple of about 13 times of the target companies – Loders, IOI Lipid Enzymtec and IOI Edible Oils.
This was based on their total audited Ebitda for the financial year ended June 30, 2016, of about 89.7 million euros.
As at June 30, 2016, the financial debt of these target companies (including intercompany advances and debts owing to external parties) amounted to about RM1.25bil.
IOI Corp said it planned to secure a bridging loan to be advanced to the target companies for the full settlement of the RM706.6mil debt owing to external parties. Such advances, together with existing intercompany advances to these companies, will be capitalised to form part of the equity of the target companies.
IOI Corp, which operates oil palm and rubber plantations in addition to doing resource-based manufacturing, bought Loders Croklaan from consumer goods giant Unilever in 2002 for 217 million euros (RM1.09bil in today’s money, about RM820mil then).
This was part of its plan to transform into a fully integrated global palm oil group with downstream presence in food ingredients and oleochemicals.
During the 14 years under IOI Corp, Loders has grown from having three processing plants to seven plants in Europe, North America and Asia, and earnings have nearly quadrupled during this period, IOI said in a press statement.
Last year, the group saw a significant disruption to its specialty oils and fats businesses in Europe and the United States after the Roundtable on Sustainable Palm Oil (RSPO) certification for its entire oil pslm production was suspended effective April 1, 2016.
The suspension was made following complaints against IOI Corp’s Indonesian subsidiaries’ plantation estates.
After the suspension was lifted in August 2016, the group worked towards regaining its lost oils and fats business.
Executive chairman Tan Sri Lee Shin Cheng, in the company’s 2016 annual report, recalled that IOI’s specialty oils and fats sub-segment “experienced the most difficult times since the acquisition of Loders Croklaan group in 2002 from Unilever.”
This sub-segment, he added, was on a volume and profit growth path for some years especially in the Americas and Asia regions before the RSPO certification suspension.
The specialty oils and fats business of IOI Loders Croklaan consists of supplying fractionated oils and blends, specifically formulated as ingredients required by the processed food industry, principally for applications in the bakery, confectionery, frying, margarine and infant nutrition sectors.