Long-time Golden Agri shareholders take profit

The $277 million placement by two shareholders in the palm oil producer is priced at a 9.6% discount.
Two individual shareholders in Golden Agri Resources have raised a combined S$400.5 million ($277 million) from the sale of shares in the Indonesia-based crude palm oil producer.

The placement, which was arranged by CLSA, attracted good interest on the back of strong demand for crude palm oil (CPO) and rising CPO prices and ended about 1.6 times covered, according to a source. The demand was sufficient to have allowed the upsize option of 45 million shares to be exercised, but one of the vendors had wanted a price of at least S$1.80 per share and decided not to sell any additional paper. The final deal size therefore was equal to the base size of 225 million shares.

The shares were offered in a range between S$1.76 and S$1.85 and were priced at S$1.78 as the positive sentiment surrounding the sector was up against a growing reluctance among many investors to increase their exposure in the current volatile markets.

The latter was also reflected by the fact that the indicative price range represented a wide discount range of 6.1% to 10.7%. The final price translated into a 9.6% discount versus yesterdayÆs close of S$1.97.

The share price has had a strong run however, gaining about 140% from the mid-August lows, including a 2.6% rise yesterday.

Neither of the vendors was disclosed, although a source says they both bought into the company in 1998 during the financial crisis. When the company first listed in Singapore in 1999 it traded at an adjusted price of around S$0.50, suggesting any investment made before then would have yielded a handsome profit. The sellers each held less than 5% of the company before this transaction.

More than 50 accounts bought into the placement with about 52% of the allocations going to Asian accounts, 35% to the UK and 13% to the US.

The placement came a day after Malaysian CPO producer Wilmar International raised $500 million from the sale of convertible bonds. The issue, which was arranged by CIMB, DBS and Goldman Sachs, struggled a bit as investors felt the initial price didnÆt take into account the limited availability of stock to borrow. But after the bonds were re-offered below par they ended up attracting more than 60 investors.

Sources said yesterday that expectations that WilmarÆs controlling shareholder will cut its stake over time should increase the free-float and reduce the stock borrow cost. Consequently, the CB looked like an ôokayö buy for the longer term, one source argued.

Golden Agri is the largest Indonesian plantation group with integrated operations ranging from plantations to the production of palm oil-based and edible fat products. The group currently has 352,000 hectares of planted land, which it aims to increase by 50,000-60,000 hectares per year using an existing 1.3 million hectare land bank. As of the end of September, Golden Agri had planted an additional 45,000 hectares of land this year.

The company recently increased its ownership of PT Smart to 92.7% from 83% at a cost of $124 million, which is expected to result in immediate benefits to the bottom line. In the nine months to September, Golden Agri reported a 36% rise in net profit to $591 million.
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