- Sime Darby Bhd is offering GBP7.15 cash/share (or PGK28.79/share) for New Britain Palm Oil Bhd (NBPOL) that would likely result in it assuming control of the London- and PNG-listed group.

- The offer price represents a premium of 85% and 79.9% to NBPOL’s last closing prices on the LSE and the Port Moresby Stock Exchange on 8 Oct 2014, respectively.

- It is conditional upon Sime Darby having acceptances resulting in it having at least a 51% stake in NBPOL. It may appear steep at 22x FY14F consensus earnings, but is at a palatable 15x FY15F earnings.

- Excluding all the other assets, the offer price values the 80,000ha palm plantation land alone at an EV of RM80,000/ha. But apart from the fully productive plantation of ~80,000ha, NBPOL also has 12 CPO mills, two refineries, as well as sugar cane plantation (7,718ha) and pasture land (9,282ha) with 20,000 cattle heads. NBPOL potentially has ~30,000ha of land for oil palm cultivation.

- Crucially, Sime Darby said the PNG Prime Minister, Peter O’Neill, had written to it acknowledging that the takeover NBPOL would not be contrary to PNG’s national interest. Sime Darby intends to delist the company from the LSE.

- The offer is also subject to the European Commission’s approval without any conditions not agreeable to Sime Darby. A takeover notice will be sent to NBPOL immediately following the announcement.

- The offer values of NBPOL at ~GBP1.073bil (RM5.7bil) or PGK4.319bil. Sime Darby Plantation intends to finance the transaction from its existing cash resources and credit lines.

- Sime Darby said NBPOL independent directors had indicated that they intended to recommend that shareholders accept the offer, subject to the independent expert concluding that the offer is fair and reasonable.

- Sime Darby expects a formal offer to be made 14 days after the takeover notice is sent to NBPOL and ending 30 days after the sending of the notice. It expects the offer to be completed by the end of December 2014. Sime Darby has scheduled an analyst briefing at noon today.

Source: AmeSecurities