F&NHB’s subsidiary proposes to acquire entire stake in Ladang Permai Damai for RM216.6m

A UNIT of Fraser & Neave Holdings Bhd (F&NHB) has proposed to acquire the entire equity interest in Ladang Permai Damai for a cash consideration of RM216.6 million (S$68.3 million), the food and beverage company said in a bourse filing on Monday (Apr 25). 

F&NHB announced that its indirect subsidiary, Dagang Sejahtera Sdn Bhd (DSSB) - in which F&NHB has a 65 per cent stake - has entered into a conditional share sale agreement with Dupont & Leosk Enterprises and Malaysia Nominees (Tempatan) for the proposed acquisition. F&NHB is a subsidiary of mainboard-listed Fraser & Neave (F&N). 

DSSB, which is principally engaged in investment holding activities, has a share capital of RM8.6 million comprising 8.6 million ordinary shares, all of which have been issued and fully paid-up.

Ladang Permai Damai is principally engaged in the cultivation of oil palm, processing of fresh fruit bunches and marketing of crude palm oil, palm kernel and fresh fruit bunches. Its share capital is RM25 million comprising 25 million ordinary shares, all of which have been issued and fully paid-up.

The main underlying assets of Ladang Permai Damai are the Permai Damai Estates, which are 8 parcels of agricultural leasehold land measuring in aggregate 2,726.48 ha located in Mukim Gemas, Daerah Tampin and Negeri Sembilan. 

“The business intention for DSSB’s acquisition of Ladang Permai Damai is for the F&NHB Group to embark on the upstream fresh milk business for downstream production and distribution of fresh milk,” the group said. This will enable F&NHB to be less dependent on imported milk and to promote the local agricultural industry, it added.

The group noted that after the completion of the proposed acquisition, Ladang Permai Damai will lease the Permai Damai Estates to F&NHB “at a fair market rate” to carry out operations of the integrated dairy farm and crop plantation. 

According to the group, DSSB has proposed to finance the acquisition via internal funds and/or borrowings, with the exact funding mix decided at a later stage after taking into consideration F&NHB’s gearing level, borrowing costs as well as internal cash requirements. 

Besides funding the proposed acquisition, DSSB is not expected to require any further or additional capital or funds, the group added. The acquisition is expected to be completed in the third quarter of 2022.

The deal is not expected to have any effect on the share capital and substantial shareholders’ shareholdings of F&NHB, as it does not involve issuance of shares in F&NHB, the group noted. The deal is also not expected to have a material impact on the gearing of F&NHB, or on the group's earnings for the financial year ending Sep 30, 2022.

Based on the latest audited consolidated financial statements of F&NHB as at Sep 30, 2021, and assuming the proposed acquisition was completed as at Sep 30, 2021, F&NHB’s pro forma earnings per share would fall to 105.4 sen from 107.8 sen.

The purchase price of RM215.6 million was arrived at on a “willing-buyer willing-seller” basis after taking into account, inter-alia, the following: the market value of RM224.2 million for the Permai Damai Estates as ascribed by an independent valuer; the suitability of the Permai Damai Estates for F&NHB's integrated dairy farming project; and on the condition that Ladang Permai Damai will have no outstanding debts or liabilities upon completion. 

F&N shares closed at S$1.37, up 0.7 per cent or S$0.01 on Monday, before the announcement.