- Sime Darby has despatched its offer document to the shareholders of New Britain Palm Oil Ltd (NBPOL) in relation to its conditional takeover offer at GBP7.15/share cash (~RM37.70/share) or for a total of GBP1,073 million (~RM5,657.8mil).

- The offer will remain open for 57 days until 5pm on 18 December 2014 (PNG time) if received within PNG, or 1pm (UK time) if received within the UK on 18 December 2014.

- According to its announcement yesterday, NBPOL’s independent directors have unanimously recommended that shareholders accept the offer, in the absence of a superior proposal. Pursuant to the completion of the takeover by end-2014, SD Plantation’s enlarged land bank would measure ~1mil hectares.

- Sime Darby reiterated that the offer is in line with its Strategy Blueprint to expand the land bank of Sime Darby Plantation, while NBPOL, with its brown field assets, is expected to contribute immediately to earnings without the incumbent risk associated with a green field expansion.

- It said the offer is expected to result in potential synergies between the group and NBPOL by way of expansion into the upstream and downstream sectors, combined R&D facilities and new growth opportunities in PNG.

- The offer will be financed via internal funds and borrowings, the exact quantum of which cannot yet be ascertained as the final amount will be dependent on the level of acceptances. Sime Darby has said it would fund 80% of the acquisition via borrowings.

- We remain negative on the proposal. We had earlier cut our fair value with a wider discount to an unchanged SOP value. We deem the high valuation (at 22x FY15F consensus earnings) and the premium to be paid for NBPOL as having an offsetting effect on the unlocking of value from the potential listing of the auto division.

- Nonetheless, we do acknowledge that the value propositions ahead would depend largely on what synergies and additional benefits Sime Darby could derive from the acquisition.

- We maintain BUY, with an unchanged fair value of RM10.58/share – based on a 15% discount to our SOP value of RM12.45/share. The stock remains a beneficiary of any upward trend in CPO prices.

Source: AmeSecurities