The Failure of Boustead to Sell Boustead Plantation: A Troubling Precedent

The collapse of the deal where $BSTEAD / 2771 (BOUSTEAD HOLDINGS BERHAD) was to sell 33% plus 1 share of $BPLANT / 5254 (BOUSTEAD PLANTATIONS BERHAD) to $KLK / 2445 (KUALA LUMPUR KEPONG BERHAD) before the deadline has sent shockwaves through the market.

While both parties have maintained a gentlemanly demeanor, simply stating that the conditions for the strategic alliance agreement could not be met, leading to the termination of the transaction, market rumors suggest strong opposition from political figures to this deal. If true, this would represent a significant setback to Malaysia's corporate activities and future economic trajectory.

These comments reflect political interference in free economic activities, leaving the market in a state of uncertainty.

It's worth noting that Boustead Holdings does not appear to have been founded by Malays, so why the heightened sensitivity among political figures? Hopefully, these are just baseless rumors.

Prior to this divestment, due to the highly attractive acquisition price offered by KLK, which was even willing to play second fiddle to facilitate Boustead Holdings, this was a rare and beneficial proposition for the debt-laden Boustead Holdings. Hence, it seemed like a perfect match.

For this divestment activity, Boustead Holdings had to convene an extraordinary general meeting to seek shareholder approval. What's less known is that on the eve of this massive meeting, Boustead Holdings, which was in the final stages of its privatization exercise to compulsorily acquire the remaining shares of the company, managed to complete the exercise on the day before the extraordinary general meeting. As a result, on the day of the meeting, no other shareholders were eligible to attend, turning it into a one-man show, with the motion being passed without any dissenting voices.

This occurred after Boustead Holdings had delisted from the stock exchange and was carried out quietly, with only a few minority shareholders who had not yet accepted Boustead Holdings' full acquisition receiving the extraordinary general meeting notice, leaving many others in the dark about this development.

So, given the urgency displayed by Boustead Holdings in pursuing the divestment of Boustead Plantations, why did they suddenly hit the brakes and call it off? After KLK paid the deposit, it started buying BPLANT's shares in the market, acquiring approximately 3% of the shares. From this action, it's clear that KLK was not the party that called off the deal.

Now that the acquisition has failed, it has incurred some unrealized losses on its BPLANT shares. Therefore, stopping the deal doesn't seem prudent for KLK.

What's even more perplexing is that as soon as the acquisition agreement was terminated, Boustead Plantations received a letter from Armed Forces Fund Board (LTAT), expressing its intention to continue with the same acquisition proposal at the same price of RM1.55 per share.

The Armed Forces Fund Board is the parent company of Boustead Holdings. Seeing this letter, one cannot help but wonder why they didn't choose this path in the first place if they knew it would come to this? Why did they involve KLK?

While the Armed Forces Fund Board's letter stabilized the stock price, it now appears that instead of raising approximately RM1.15 billion through the divestment to address part of their debt, LTAT will need to spend another RM1.1 billion to acquire the remaining BPLANT shares. It seems like a reversal of priorities. Did they not carefully consider such a major about-face decision, or were they pressured by the government to overturn their original proposal?

Regardless of how things unfold, this transaction has become a negative example in the Malaysian stock market, serving as a warning for future corporate mergers and acquisitions.


Translated from here: https://cutt.ly/mwmtkeJ6