KUALA LUMPUR (Sept 18): Lembaga Tabung Angkatan Tentara’s (LTAT) move to offload a 33% stake in Boustead Plantations Bhd (BPlant) to Kuala Lumpur Kepong Bhd (KLK) was necessary to avoid Boustead Holdings Bhd from going bankrupt, said Defence Minister Datuk Seri Mohamad Hasan.

Mohamad said the stake disposal for RM1.15 billion is to address Boustead’s cash flow issues and debt settlement of RM800 million by end-2023.

“The disposal is crucial to prevent Boustead from falling into bankruptcy if the debt is not settled in time,” he said in the Dewan Rakyat on Monday, in response to arguments raised by Opposition MPs regarding the stake sale during the 12th Malaysia Plan (12MP) Mid-Term Review debate session last week.

The deal — which is set to see KLK stake in BPlant’s rise from nil to 33% and subsequently to 65% via a mandatory general offer to be triggered — faced backlash from a number of Opposition MPs, who claimed that this would damage Malaysia’s aim of achieving 12MP’s Bumiputera corporate equity target of 30% by 2025.

The transaction will see LTAT keeping a 35% stake in BPlant, from 68%. Boustead and LTAT are also given the first right of refusal to keep two parcels of BPlant land in Semenyih, Selangor and Batu Kawan, Penang, which could be developed kin the future.

Mohamad said a total of 15 companies involved in the plantation sector ― including Sime Darby Plantations Bhd, Tabung Haji, Tradewinds Corp, and FGV Holdings Bhd ― were invited to the two- to three-month bidding period for the BPlant stake, but most of the companies declined to participate or made too low of an offer.

“Tradewinds' offer, for instance, was too low. Boustead as a company opted for the higher bid [from KLK] because they need RM800 million by year-end, and another RM1.7 billion to redeem their Islamic Medium-Term Notes,” he added.

However, the minister noted that Boustead’s deal with KLK has yet to reach the stage where it requires his approval, adding that he is also in dialogue with the Ministry of Finance (MOF) to address Boustead’s other debt obligations.

Touching on BPlant’s viewpoint, Mohamad underlined that the plantation company also requires stronger financial resources to fund its replanting efforts, as close to 49% of its planted area is over 20-years-old.

“Due to this, BPlant’s plantations recorded the lowest fresh fruit bunch production in the plantation industry with 13.3 tonnes per hectare, versus an average of 20 tonnes per hectare.

“BPlant’s profits in the past few years have been driven by the sale of land as well as elevated crude palm oil prices,” he said.

Talks with MOF to resolve LTAT’s cash flow issues

Mohamad said if the BPlant stake disposal was not undertaken and Boustead fell into bankruptcy, LTAT would be the one to face issues, as 50% of the armed forces retirement fund’s assets are in Boustead.

Having 50% of its assets in one basket is not a good thing for LTAT as a retirement fund, the minister said, stressing that at least 15% should be in liquid assets.

“However, LTAT’s liquid assets stand at less than 20% currently. If anything happens, LTAT will face a problem.

“So, we want to unlock the value of the assets. Let Boustead proceed first, and then we will come in to consider if it is the best way to do it,” he added

Beyond this, Mohamad said he is also in talks with the MOF to formulate how LTAT’s cash flow can be improved to enable dividend payment to its members.

Shares in KLK closed RM1.84 or 7.89% lower at RM21.48, giving the group a market capitalisation of RM23.22 billion. BPlant’s shares ended unchanged at RM1.46, valuing the company at RM3.27 billion.