(Alliance News) - Equatorial Palm Oil PLC on Monday said it has sold 50% interest in loss-making Liberian Palm Developments Ltd to Kuala Lumpur Kepong Berhad for a nominal consideration of GBP1.
Kuala Lumpur Kepong, which owns 63% stake in Equatorial Palm Oil, is a manufacturer of renewable palm-based oleochemical products and derivatives in the oleochemical industry.
Liberian Palm Developments holds concessions to the Palm Bay and Butaw palm oil estates in Liberia, granted for 50 years. The Palm Bay estate comprises 13,007 hectares of land as part of the concession, as well as expansion areas totalling 20,234 hectares. The Butaw estate comprises 8,011 hectares of land as part of the concession, as well as expansion areas totalling 46,539 hectares.
The proposed stake sale will eliminate any future costs to the company associated with its interest in Liberian Palm Developments and enable Equatorial Palm to seek to acquire another asset which is more likely to generate value for shareholders in the near to medium term, Equatorial Palm Oil said.
Equatorial Palm Oil expects to have available cash resources of GBP800,000 on completion of the disposal, which the company will utilise in executing a potential acquisition.
As part of the deal, London-based Equatorial Palm Oil will also transfer around USD6.2 million of outstanding debt owed to Equatorial Palm Oil by Liberian Palm. which ranks behind Liberian Palm's outstanding loans with Kuala Lumpur Kepong of USD131 million.
Equatorial Palm Oil Chair Michael Frayne said: "The last few years have proved to be a very difficult time for the palm oil industry in Liberia, and worldwide, which as shareholders will be aware has significantly impacted the group's ability to develop its palm plantations at the rate we would have hoped. Indeed, last year we announced that Butaw estate would cease operations as it was not economically viable to continue.
"Having extensively considered the proposed disposal, I, and Geoff Brown, believe that it is in the best interests of shareholders for Equatorial Palm Oil now to dispose of its interest in Liberian Palm Developments and seek to utilize its cash reserves, of approximately GBP800,000 expected on completion of the proposed disposal, to seek to acquire another asset which can deliver value generation for shareholders in the near to medium term".
Shares in Equatorial Palm Oil were down 10% at 0.36 pence each in London on Monday afternoon.
By Tapan Panchal; tapanpanchal@alliancenews.com
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