SINGAPORE (Oct 11): GCCP Resources, a Malaysian calcium carbonate quarry company, is buying an Indonesian palm oil company PT Arjuna Utama Sawit in a reverse takeover deal worth $220.3 million.
GCCP plans to pay for this acquisition by issuing 3.67 billion new shares at six cents each. The sellers are Premier Palmoil Energy and PT Oilim Agriculture, described as independent third parties.
The value of this deal is based, for now, on an internal valuation, which will then be put before an independent valuer.
GCCP has an existing share base of 1.17 billion shares.
PT Arjuna Utama Sawit, the target company, owns 53,000 hectares of oil palm plantations in Central Kalimantan, Indonesia. It also owns mills that can produce 350,000 tonnes of crude palm oil per year. Nearly 40% of its planted trees are either considered young, or immature.
According to GCCP, its existing quarry business will remain within the enlarged entity, although there are plans to change the listed company’s name upon completion of the deal.
GCCP sees the move into Indonesia’s palm oil industry an attractive one for a couple of reasons.
First, the Indonesian government has an existing biodiesel programme which is meant to help reduce Indonesia’s dependence on fuel imports by progressively introducing palm oil in regular diesel fuel. Palm oil demand is set to grow.
In addition, PT Arjuna Utama Sawit, the target’s plantation, has a young age profile. There are plans to venture further downstream into higher-value palm-based products.
“In addition, the proposed acquisition could potentially enable the company to enhance shareholder value by generating renewed investor interest, create the potential to significantly increase the market capitalisation of the company and widen the investor base for its shares,” GCCP states.
For the 2Q ended June 30 2019, GCCP suffered a 43% y-o-y drop in revenue to RM2.7 million. Losses widened 20% y-o-y to RM2.3 million in the same period.
The company blamed a slowing world economy that led to weaker demand for its products.
Year to date, GCCP shares have dropped more than 70%. It last traded on Sept 26 at 0.7 cents, valuing the company at $8.2 million.
