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MP Evans shares soar to record high on hostile bid from KLK

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Shares in MP Evans soared 45% to an all-time high after the London-listed plantations group, founded 146 years ago, received a hostile takeover bid by sector giant Kuala Lumpur Kepong.

Kuala Lumpur Kepong – which, with a stockmarket value of 25.9bn ringgit ($6.2bn) ranks as one of the world's biggest plantations groups – revealed that it had offered 640p per share for MP Evans, valuing the target company's shares at £361m ($441m).

While MP Evans rejected the offer, Kuala Lumpur Kepong, better known as KLK, said it "believes that MP Evans shareholders should now have the opportunity to decide on the merits of [the] offer".

MP Evans stock soared 45% to 621.625p in midday deals in London, an all-time high for the shares by a distance on records going back to 1983, and coming within 4% of the KLK offer price, suggesting the market sees a strong chance of a deal succeeding.

Earlier, KLK shares cosed down 0.2% at 24.24 ringgit in Kuala Lumpur, before the MP Evans was announced.

'Strategic merit'

The KLK statement, which MP Evans has yet to reply to, said that there was "strategic merit" in the tie-up, in "synergising" the groups' operations "from a geographical and capabilities perspective".

MP Evans focuses on production of sustainable palm oil in Indonesia, where KLK also has some plantations, with its 270,000-hectare empire also spanning Malaysia and Liberia.

Both groups also have smaller rubber operations, as well as property arms, with KLK boasting too a substantial palm oil refining business, including processing the vegetable oil into chemicals such as fatty acids and glycerine, besides biodiesel.

"Together, KLK and MP Evans should establish best practices for the further growth of both companies and enable the enlarged group to capitalise on economies of scale in the oil palm sector," the statement added.

MP Evans, in reply, said that the KLK offer "wholly inadequate and very substantially undervalues the company, its unique position and its future growth potential".

'Compelling value proposition'

KLK also said that its offer, pitched at a 51% premium to MP Evans' closing share price on Monday, offered a "compelling value proposition" to the London-listed group's investors.

The bid presents "a substantial premium to the current share price, providing an opportunity to realise in full the value of their investment in the context of the low liquidity in the trading of MP Evans shares," KLK said.

London-listed plantations shares have long traded at lower ratings than peers in markets such as Kuala Lumpur and Jakarta, a discount attributed to the greater familiarity of South East Asian investors with the sector.

South East Asia is the major palm oil, and rubber, producing region.

London-listed New Britain Palm Oil was bought by Malaysia's Sime Darby last year, while Rea Holdings has investigated a getting some form of Jakarta listing to tap into higher local ratings.

The weakness of sterling since the UK voted to quit the European Union has also improved the affordability of UK assets to foreign buyers.

By Mike Verdin

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