KUALA LUMPUR: Boustead Plantations Bhd (BPB) is acquiring 4,915.25 hectares of oil palm plantation land in Sandakan, together with a palm oil mill for RM397 million cash.
In a filing to Bursa Malaysia today, the company said it would fund the acquisition through internally generated funds and borrowings.
It said the acquisition represents a move to replace some of BPB group’s plantation land in Peninsular Malaysia which were disposed in recent years with sizable plantation lands in Sabah at a lower cost.
“This is in view of the rapid developments in Peninsular Malaysia which have resulted in land being less viable for plantation activities. This strategy also presents BPB Group with the opportunity to improve its income over the long term for its future growth,” it said.
BPB said the acquisition was part of the group’s strategy to acquire more plantation lands in Malaysia in view of the scarcity of suitable and sizeable land banks for oil palm cultivation.
Upon completion, the total plantation land bank held by BPB Group will increase by about five per cent to 98,332 ha from 93,417 ha.
This also represents an increase of about six per cent in total planted area under oil palms to 79,427 ha from 74,985 ha.
It said the plantation lands are centrally located within BPB Group’s existing estates as well as the recently-acquired Pertama Estates.
BPB said the acquisition of the palm oil mill enabled the group to benefit in terms of processing the fresh fruit bunch produced from the plantation lands as well as its existing estates surrounding the mill.
The acquisition will reduce BPB Group’s estimated capital expenditure for the Pertama Estates as previously announced on October 30, 2017 considering that the palm oil mill will now replace the group’s initial plan to construct a new palm oil mill on one of the Pertama Estates.
“The acquisition will enable BPB to strategically position itself to stay competitive in highly challenging market conditions.
“BPB Group believes that the strategic value creation to be derived from the proposed acquisition will translate into operational efficiencies thus improving profitability in the long run,” it said.