Premium cash offer for New Britain

Shares in New Britain Palm Oil have soared following a generous cash offer from Sime Darby.

October 15, 2014

Shares in New Britain Palm Oil (NBPO) soared more than 70 per cent following news of a knockout cash offer from Sime Darby Plantation to acquire the entire share capital of the company at 715p. This was quite the volte-face, given that just 10 days earlier Sime Darby had stated it would not proceed with an offer. It's widely believed that the change of heart came after the deal was rubber-stamped by the Prime Minister of Papua New Guinea.

IC TIP: Sell at 664p

Kulim Berhad, the 49 per cent stakeholder in New Britain, intends to accept the offer and New Britain's board will recommend that all shareholders do the same. The transaction is expected to be completed by the end of December.

The news will come as a relief to shareholders, who have been on a roller-coaster ride all summer, as offers have come and gone. It's still subject to Sime Darby holding more than 51 per cent of New Britain shares, but, given the premium on the table, that's highly likely. The deal values New Britain at $28,000 per mature hectare and $25,000 per immature hectare. Broker Peel Hunt says this reflects the long-term prospects for palm oil and continues the theme of consolidation in an industry where cultivatable land is growing rare. Back in July we told cautious investors to take profits on our successful buy tip (414p, 30 May 2014) and higher-risk investors to hang on for a possible takeover. Now, that has materialised. Those of you with shares should sell to Sime Darby and bank your 73 per cent return.

Last IC view: Hold/Take profits, 523p, 30 Jul 2014