Malaysia’s Boustead Mulling Options for Palm Oil Unit

(Bloomberg) -- Malaysian conglomerate Boustead Holdings Bhd. is weighing options for its listed palm oil subsidiary including a sale, people with knowledge of the matter said.

The parent of Boustead Plantations Bhd. is working with an adviser on the potential options, the people said, asking not to be named as the information is private. A plan could be implemented as soon as in the next few weeks, they said.

The holding company, which owns 57.4% of the subsidiary, could sell the unit or lease the plantations to third parties, the people said. Another option is to sell the individual plantations separately, one of the people said.

Boustead Holdings shares climbed as much as 5.3% following the Bloomberg News report, their highest intraday level in a week. Shares in Boustead Plantations rose as much as 1.8%, giving the unit a market value of about 1.3 billion ringgit ($312 million).

Malaysia's armed forces pension fund Lembaga Tabung Angkatan Tentera, the majority shareholder of Boustead Holdings, owns 12.1% of the plantations unit, according to data compiled by Bloomberg.

Deliberations are still ongoing and Boustead Holdings could decide not to proceed with a sale, the people said.

Boustead Holdings does not have immediate plans to pare down its stake in Boustead Plantations, a spokesperson said in response to a Bloomberg News query. Boustead Plantations is a core contributor to the group's performance, however the company is continuously on the lookout to unlock value within the group, they said.

Restructuring Challenges

The potential sale comes as Boustead Holdings is attempting to reinvent itself amid difficulties that predate the coronavirus pandemic, including debt totaling almost 7.5 billion ringgit, according to its earnings statement for the quarter ended March 31. Its shares tumbled in February after LTAT announced it would not proceed with a take-private proposal for Boustead, citing economic challenges from the coronavirus pandemic.

The restructuring plan by one of Malaysia's oldest conglomerates, which traces its roots to 1828, included a pledge to dispose of non-strategic assets.

Palm oil prices are up 3.7% this year after touching an all-time high in May. Palm oil planter Kuala Lumpur Kepong Bhd. last month offered to buy a controlling stake in smaller rival IJM Plantations Bhd. for 1.5 billion ringgit.

Boustead Plantations owns and leases a total of 48 oil palm plantation estates and 10 palm oil mills in Malaysia, according to its website. Its land bank consists of more than 98,200 hectares, of which 79,400 hectares are used for oil palm cultivation.

The unit's Chief Executive Officer Ibrahim Abdul Majid resigned in order to join Boustead Holdings, according to an exchange filing Tuesday. Majid will lead the company's plantation technology and innovation initiatives.