Sime Darby, I&P Group exchange assets for strategic fit

KUALA LUMPUR (Oct 7): Sime Darby Bhd and I&P Group Sdn Bhd have entered into related party transactions to exchange assets that would result in a better strategic fit for the respective companies.

In a statement, Sime Darby said it will expand its plantation area in Malaysia for the first time since 2007, while I&P would secure a sizeable piece of land in Semenyih, Selangor.

Sime Darby Property Sdn Bhd, wholly-owned by Sime Darby, expects to unlock the value of the Semenyih land to fund strategic property development projects, it said.

Sime Darby president and group chief executive officer Tan Sri Mohd Bakke Salleh said the deal made sense for both parties as it was able to match the group’s needs with its growth plans.

“The plantation division will be buying brownfield assets, its first land expansion in Malaysia since 2007 and it will immediately contribute to earnings. Our property division will be able to focus on strategic developments such as the Malaysia Vision Valley and City of Elmina,” he added.

In a filing with Bursa Malaysia, Sime Darby said its indirect subsidiary Glengowrie Rubber Company Sdn Bhd (GRC) planned to sell a total of 325.7ha of freehold land in Hulu Langat, Selangor to Petaling Garden Sdn Bhd (PGSB) for RM429 million.

The GRC land is not a key development focus area for Sime Darby Property, it said.

“As the disposal is a related party deal due to Sime Darby and I&P sharing common major shareholders, it will require the approval of GRC’s minority shareholders,” it said.

GRC is 78.7%-owned by Sime Darby Property while PGSB is a wholly-owned unit of I&P.

Sime Darby Property managing director Datuk Jauhari Hamidi said the planned land sale would unlock the value of its assets at a reasonable consideration in the current soft property market.

In the other transaction, Sime Darby Plantation plans to acquire 768.5ha of oil palm estates, and an oil palm mill in Johor from Yong Peng Realty Sdn Bhd (YPR) and Perusahaan Minyak Sawit Bintang Sdn Bhd (PMSB) for a total of RM106.7 million.

Sime Darby said YPR owns Lian Seng Estate in Batu Pahat and Talisman Estate in Kluang, Johor where about 98% of both estates, which are near Sime Darby Plantation estates in central Johor, are planted with oil palm.

PMSB owns a 70-tonne per hour oil mill which is licensed to process 360,000 tonnes of fresh fruit bunches a year.

In addition, Talisman Estate has the potential for property development as it is located about 12km away from Kluang.

YPR, involved in cultivating and marketing oil palm fruits, and palm oil processor PMSB, are indirect wholly-owned subsidiaries of I&P Group.

Sime Darby Plantation managing director Datuk Franki Anthony Dass said it was a rare opportunity to acquire quality brownfield estates in Peninsular Malaysia.

He said the group would earn immediate earnings and be able to deliver more value-generating synergies and cost savings by sharing estate and mill management.

Sime Darby said the land disposal and asset acquisition are not conditional upon one another.

Sime Darby shares closed down two sen or 0.26% at RM7.79 yesterday with a market capitalisation of RM49.3 billion.

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This article first appeared in The Edge Financial Daily, on Oct 7, 2016. Subscribe to The Edge Financial Daily here.