Shares in Equatorial Palm Oil soared 40% after the West
African palm oil group revealed a $35.5m cash injection into the Liberian joint
venture, most gained from Malaysian giant Kuala Lumpur Kepong.
Equatorial Palm Oil said that it would provide $7.5m of the
funding for the Liberian Palm Developments, through an issue of fresh shares, a
contribution which will be matched by Kuala Lumpur Kepong.
However, Kuala Lumpur Kepong, Malaysia's third largest
listed plantations company, with a stockmarket capitalisation of nearly $8bn, will
also provide up to $20.5m through debt or preferential shares, at a rate of the
Libor interest rate plus 5 percentage points.
The funding "has been achieved with no further dilution for Equatorial
Palm Oil shareholders", the London-listed group said.
Equatorial Palm Oil executive director Geoffrey Brown said: "Kuala
Lumpur Kepong, as one of the world's largest plantation companies, will bring
their enormous and varied experience to our estates and help us achieve the
great potential in order to drive value for all shareholders."
The deal marks the end of a tricky period for Equatorial
Palm Oil, which in September admitted "material uncertainty" over its
future thanks to the funding difficulties at Liberian Palm Developments, which
is developing plantations in the West African Country.
However, Kuala Lumpur Kepong not only bought out the stake
owned by India's Biopalm Energy in the joint venture, but has become the major
shareholders in Equatorial Palm Oil too, raising its stake from an initial 20%
to a little over 63%.
For the Malaysian group, the investment represents an entre
into West Africa, which has become an increasingly important palm oil producing
region, with fresh plantation land in the key South East Asian producing
countries, Indonesia and Malaysia, running low.
While the Equatorial Palm Oil investments represent Kuala
Lumpur Kepong's first foray palm oil outside South East Asian, major rivals such
as Golden Agri Resources and Sime Darby have already gained footholds in West
Friday's deal will also see Kuala Lumpur Kepong gain a
$1m-a-year management feed for running the joint venture, and an extra place on
the Equatorial Palm Oil board, with the Malaysian group's legal head, Yap Miow
Kien, joining as a non-executive director.
KLK chief executive Lee Oi Hian and regional director Teh
Sar Moh Nee are already on the Equatorial Palm Oil board.
However, Michael Frayne, one of the Equatorial Palm Oil palm
oil founders, will lose some responsibilities, switching to non-executive, from
Equatorial Palm Oil shares touched 12.75p in London, a
15-month high, before easing back to 12.25p in lunchtime deals, up 35% on the