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Equatorial Palm OiI shares soar on KLK investment

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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."

Difficult period

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 Africa.

Board changes

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 executive, chairman.

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 day.


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