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MP Evans launches share buyback, after repelling takeover bid

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Shares in palm oil producer MP Evans rose, as the board rewarded shareholders with a buyback programme, in the wake of a failed takeover.

MP Evans will buy back $5m of company shares, in the wake of a failed takeover from rival producer Kuala Lumpur Kepong.

The board said it "continues to believe that the current share price very substantially undervalues the group's assets, the performance of the business to date and its future prospects".

Takeover bid fails

A hostile takeover bid from KLK failed last month, having secured acceptance from just 13.2% of MP Even's ownership, compared to the 50% needed.

The £415.4m offer valued MP Evens shares at £7.40 apiece, 71% higher than where shares were trading before KLK's first overtures back in October.

MP Evans shares tumbled in the wake of the failed takeover, but bounced rapidly back.

Shares were up 1.6% on Monday, at £6.45, in early-afternoon deals in London.

More supportive measures promised

"Following the recently-announced disposals of material assets, the group's robust balance sheet provides the opportunity to take advantage of prevailing market conditions to repurchase shares at advantageous levels that will be earnings enhancing," the board said.

Last month MP Evans sold a minority stake in an Indonesian palm oil business PT Agro Muko to its joint venture partner Sipef, raising $100m.

The board at the time said that it was divesting its minority-stake in the business "in favour of acquiring or developing its own, directly managed new projects".

As well as the buyback programme, the board said it was also undertaking "significant continuing capital investment across its estates, the ongoing pursuit of strategic acquisition opportunities and payment of dividends at an increased level".

Broker upbeat on MP Evans prospects

"Following its successful bid defence against Kuala Lumpur Kepong, one of the key concerns for us is that we may see a gradual drifting of the share price from current levels, as MPE naturally takes time to deploy its surplus cash into earnings enhancing assets," said VSA Capital.

"Although fairly small, the commencement of a share buy-back programme should help address this issue and maintain the share price at around the current level, given the low levels of liquidity in the stock."

VSA said that shares were unlikely to fall sharply once the buyback programme was complete "given the strength of its balance sheet".

By William Clarke

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