Carson Cumberbatch Group firms explain rationale for sale of overseas plantations

Carson Cumberbatch and Company Plc’s four Group companies Good Hope Plc, Indo-Malay Plc, Selinsing Plc and Shalimar (Malay) Plc, have issued the following statement to explain the basis for their proposed sale of overseas plantations and other measures.

In 2009, Carson Cumberbatch PLC (“CCPLC”) initiated an internal restructuring of its businesses to consolidate its plantation sector investments in both Malaysia and Indonesia under a regional holding company incorporated in Singapore, namely Goodhope Asia Holdings Ltd. (GAHL) which is a subsidiary of the Carsons Group. CCPLC, as announced to the market through the CSE and notified to its shareholders from time to time, has taken various steps towards implementing the said restructuring plan.

As a further step towards consolidation of the oil palm plantation sector of the Carsons Group, a voluntary offer was made by CCPLC and Bukit Darah PLC (BDPLC) in March 2011 to the shareholders of the oil palm companies with the objective of acquiring the entirety of the remaining minority shareholding. The said voluntary offer document, dated March 17, 2011, disclosed CCPLC and BDPLC’s intention to restructure its plantation investments under its subsidiary GAHL. 

The aforesaid offer document also mentioned that upon the completion of the Offer, the rationale and the need for the oils palm companies to continue to be listed on the CSE will be evaluated. The voluntary offer made to the shareholders of the four listed oil palm companies at the time, offered Bukit Darah and Carsons shares in exchange for their own shares, thus giving those shareholders exposure to a diverse range of businesses, as opposed to a component of the plantation business.

Since the said voluntary offer did not result in the acquisition of the entirety of the minority shares, of the four Malaysian Plantation Companies (four MPCs) namely Indo-Malay PLC, Selinsing PLC, Shalimar (Malay) PLC and Good Hope PLC, continued to remain as listed entities.

GAHL presently holds 90% to 99% of (direct and indirect) shareholding in the four MPCs as at 30 September 2015 (approximately – Shalimar (Malay) PLC – 99.27%, Indo Malay PLC – 90.78%, Selinsing

PLC – 96.21% and Good Hope PLC – 94.52%).

Future plans of the four MPCs

These companies’ asset base comprises:

(i) Four plantation estates in Malaysia of approx. 1,386 Ha (Shalimar (Malay) PLC – 304.5 ha, Indo Malay PLC – 283.9 ha, Selinsing PLC – 487.5 ha and Good Hope PLC – 310.7 ha), which is less than 1% of GAHL’s estimated total land bank. The plantation estates managed by the four MPCs in Malaysia are fully planted and fully mature. Further, there are no suitable lands in Malaysia to acquire and expand its current plantation operations in order to generate economies of scale and enhance economic returns. The rapid urbanisation in the Selangor and Perak regions of Malaysia and large scale industrial developments taking place in surrounding locations near the plantation estates, now drive the commercial value of the property market. The plantation business of the Carsons group is therefore focused fully on developing its land bank in Indonesia.

(ii) A total investment of 53.3% in Shalimar Developments Sdn Bhd (SDSB) – (13.33% individually in each of the four MPCs) with the remaining 46.66% being held by GAHL.

SDSB currently owns 84.5% of PT Agro Indomas (PTAI), a plantation in Indonesia while GAHL owns a further approximately 10% directly in PTA. It may be noted that SDSB therefore owns only approx. 17% of the Indonesian land bank of the Carsons Oil Palm Plantation Sector, the rest being directly held by companies owned by Goodhope Asia Holdings Ltd.

The past three years have seen a slowdown in the global economic outlook presenting multiple challenges to the palm oil industry. The Global Commodities market has witnessed a downturn along with a sharp decline in crude oil prices. Crude palm oil prices too have seen a similar trend with prices reaching a five-year low.

As a result of the above mentioned volatile macroeconomic and industry conditions, the economic returns to the shareholders of the four MPCs have gradually declined over the last four years as already indicated in the Annual Reports of the company.

In the above circumstances, the Board of Directors is considering the implementation of the following action plan (“Action Plan”) subject to further ongoing feasibility studies currently being carried out by listed oil palm companies and if deemed to be feasible, to obtain the necessary approvals from the relevant regulators and shareholders.

nSale of the plantation estates of the 4MPCs which has a total land extent of 1,386 Ha in Malaysia (in Selangor and Perak regions) and distribute proceeds thereof to the shareholders;

nMake arrangements for Carson’s subsidiary, GAHL (the holding company of the four MPCs) to acquire the investment of 53.3% made by the four MPCs in SDSB (which owns 84.5% of PT Agro Indomas (PTAI) with a total land area of approximately 26,861 ha in Indonesia) and the sale proceeds therefrom to be distributed to the shareholders of the four MPCs.

With this arrangement, GAHL will directly own the entire shareholding of SDSB whereas they previously held controlling interest through indirect control via their subsidiaries, the 4 MPCs. It may be noted that with this acquisition of 53.3% holding of the four MPCs in SDSB by GAHL, the PTAI investment in Indonesia will continue to remain with the Carsons Group.

It needs to be noted, that the market capitalisation of the four MPCs is greater than the net asset values as at 30 September 2015. The commercial value received from a reputed independent valuer of the company (Wan Malik) for the four MPCs is approximately RM 307,000,000 (Malaysian Ringgit 307 million only). The company is awaiting a further valuation from another reputed valuer. 

Further, based on the fair value accounting standards, the investment in SDSB by the four MPCs as stated in the Annual Report of the Companies as at 31 March 2015 is reflected close to its current market value and we do not expect a significant deviation from the same (which indicates a per Ha value of $ 13,000 on a net planted basis including infrastructure as at the said Annual Report date). This asset will remain as a direct subsidiary of GAHL and continue to be consolidated under GAHL. Therefore, the shareholder value of the four listed Malaysian oil palm companies would not be significantly affected by the divestment of the 13.33% stake of SDSB.

Upon finalisation of the Action Plan, the company intends communicating the same to shareholders of the four MPCs for their information.

Indicative timeline to complete the 

Action Plan

The Directors believe it will take a minimum 24 months to complete the Action Plan as it would entail inter alia selection of buyers, evaluation of competitive bids and obtaining the necessary regulatory and shareholder approvals to give effect to the Action Plan.