New Britain Palm Oil Independent Directors Recommend Rejection of Kulim Partial Takeover Offer
07 Aug 2013 --- New Britain Palm Oil Limited (NBPO), one of the world's largest fully integrated producers of sustainable palm oil, provides the following update with respect to the unsolicited conditional partial cash offer by Kulim (Malaysia) Berhad (Kulim) for up to 30,009,621 shares in the Company at a price of GBP 5.50 or PGK 19.36 per share.
The Independent Directors of NBPOL are of the view that the negative aspects of the Offer far outweigh any advantages which the Offer provides. Accordingly, the Independent Directors of NBPOL recommend that the Offer be REJECTED. To reject the Offer, you should do nothing and not take any action in relation to documents sent to you by Kulim.
Each Director of NBPOL intends to REJECT the Offer in relation to those NBPOL Shares held by them or in which they have a relevant interest.
NBPOL confirms that the Target Company Statement has been dispatched to shareholders in accordance with Rule 22(5) of the Takeovers Code 1998 of Papua New Guinea (“Takeovers Code”).
.
The Offer will remain open until 5:00 pm (PNG time) or 1:00 pm (UK time) on 28 August 2013. Shareholders are encouraged to read the Target Company Statement in full.
For the purpose of evaluating and responding to the Offer, the Board of NBPOL established an Independent Board Committee. The Independent Board Committee is solely responsible for assessing the merits of the Offer and preparing the Target Company Statement. The committee was comprised of Directors who are independent of Kulim, being Antonio Monteiro de Castro, Sir Joseph Tauvasa, Nicholas Thompson, Sir Brown Bai and Alan Chaytor.
Dato' Kamaruzzaman Abu Kassim and Ahamad Mohamad are Directors of NBPOL who are also directors in Kulim and, for that reason, have absented themselves from any deliberations with respect to any matters in relation to the Offer. Neither of these Directors will make a recommendation in respect of the Offer and neither of these Directors has approved the Target Company Statement.
As required by the Takeovers Code, an independent report on the merits of the Offer has been prepared by BDO. A summary of the Independent Adviser's Report is contained in section 9 of the Target Company Statement. A copy of the full Independent Adviser's Report is available on request from the Company.
In assessing the merits of the Offer, the Independent Directors of NBPOL have assessed the level of cash consideration (with the assistance of the Independent Adviser’s Report) and the other terms and conditions of the Offer, including the overall conditionality of the Offer and the stated future intentions of Kulim. They have also taken into account the partial nature of the Offer, its potential to materially reduce liquidity in trading in NBPOL Shares and the following positive and negative aspects of the Offer.
Negative aspects of the offer were described as follows:
• Offer not fair or reasonable: The Offer is neither fair nor reasonable according to the Independent Adviser.
• Offer Consideration: The Offer Consideration significantly undervalues NBPOL Shares. It is more than 15% below the low end of the fair market value range for NBPOL Shares as determined by the Independent Adviser.
• Partial offer: Depending on the level of total acceptances of the Offer, an acceptance by a NBPOL Shareholder in respect of more than 39.19% of their shareholding may be scaled back, which means NBPOL Shareholders who wish to take this opportunity to exit their investment in NBPOL can have no certainty that they will be able to do so entirely.
• Reduced liquidity: Acceptance of the Offer may materially reduce the trading liquidity in NBPOL Shares due to the reduction of the free float. In this event NBPOL Shares will be less attractive to investors, potentially resulting in a lower value for NBPOL Shares that are not sold into the Offer.
• Future growth: Accepting Kulim's Offer would deprive NBPOL Shareholders of exposure to NBPOL's growth opportunities, including benefits from any future price increases in palm oil above the recent historical lows.
• Risk of delisting from LSE: If the Offer is fully accepted, NBPOL may not satisfy the listing requirements which may result in it being delisted from the London Stock Exchange (LSE).
• Relationship Agreement: If NBPOL is delisted from the LSE, the Relationship Agreement with Kulim will be automatically terminated and the minority NBPOL Shareholders will cease to have the benefit of the Relationship Agreement.
• Conditionality of the Offer: The Offer is subject to several conditions which, if not satisfied or waived, would effectively allow Kulim to withdraw the Offer.
• Potential changes to NBPOL's operations post-Offer: A number of significant changes may be made to NBPOL and its business following the Offer, including changes to its business strategy, a reduction in employee numbers and increased Board representation of Kulim. Kulim has not ruled out making such changes in the future.
Positive aspects of the offer:
• Premium to current market price: The Offer provides NBPOL Shareholders an opportunity to dispose of at least some of their holdings at a premium to the current market price for NBPOL Shares.
• Liquidity opportunity: The Offer presents an opportunity for NBPOL Shareholders to sell at least some of their holdings at a time when trading in NBPOL Shares has been relatively illiquid when compared to other listed companies of a similar market capitalisation.
• Highlights market undervalue: The market value of the NBPOL Shares over the past 12 months has been well below the level the Independent Directors consider to be fair value. The Offer may improve market sentiment towards the NBPOL Shares by demonstrating that the Company’s major shareholder is supportive of its future growth prospects.
The Independent Directors of NBPOL are of the view that the negative aspects of the Offer far outweigh any advantages which the Offer provides.
