joint venture - oil palm plantation - kabupaten kapuas

8/2/2019 Joint Venture - Oil Palm Plantation - Kabupaten Kapuas

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General AnnouncementReference No GP-120413-2C276Company NameStock NameDate Announced

: GENTING PLANTATIONS BERHAD:GENP: 1 3 /04 /2012

TypeSubject: Announcement: TRANSACTIONS (CHAPTER 10 OF LISTING REQUIREMENTS)NON RELATED PARTY TRANSACTIONS

Description : PROPOSED JOINT VENTURE FOR THE DEVELOPMENT ANDCULTIVATION OF OIL PALM PLANTATION OF APPROXIMATELY74,000 HECTARES LOCATED AT KABUPATEN KAPUAS ANDBARlTO SELATAN, KALIMANTAN TENGAH, REPUBLIC OFINDONESIA

Attachments : 6PAnnouncement-Globalindo 13 April2012.pdfAnnouncement Details/Table Section:

The Board of Directors of Genting Plantations Berhad ("GENP" or the "Company") wishes to announce thatSunyield Success Sdn Bhd ("Purchaser"), a wholly-owned subsidiary of GENP, had on 13 April 2012 entered intoa Sale and Purchase and Subscription Agreement (liSPS Agreement") with Global Agrindo Investment CompanyLimited ("Vendor") and Global Agripalm Investment Holdings Pte Ltd ("JV COli) for the purpose of establishing ajoint venture for the development and cultivation of approximately 74,000 hectares of oil palm plantation inKabupaten Kapuas and Barito Selatan, Kalimantan Tengah, Republic of Indonesia ("Proposed JV").Please refer to the attached announcement for further details.This announcement is dated 13 April 2012.

2012, Bursa Malaysia Berhad. All Rights Reserved.

http://announcements.bursamalaysia.comlEDMS/edmsweb.nsflLsv AllByID/500AEA309... 13/04/2012
http://announcements.bursamalaysia.comledms/edmsweb.nsflLsvhttp://announcements.bursamalaysia.comledms/edmsweb.nsflLsv


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oGENTINGPLANTATIONS

PROPOSED JOINT VENTURE FOR THE DEVELOPMENT AND CULTIVATION OF OIL PALMPLANTATION OF APPROXIMATELY 74,000 HECTARES LOCATED AT KABUPATEN KAPUASAND BARITO SELATAN, KALIMANTAN TENGAH, REPUBLIC OF INDONESIA

1. INTRODUCTIONThe Board of Directors of Genting Plantations Berhad ("GENP" or the "Company") wishes toannounce that Sunyield Success Sdn Bhd ("Purchaser"), a wholly-owned subsidiary of GENP,had on 13 April 2012 entered into a Sale and Purchase and Subscription Agreement ("SPSAgreement") with Global Agrindo Investment Company Limited (Vendor") and Global AgripalmInvestment Holdings Pte Ltd ("JV Co") for the purpose of establishing a joint venture for thedevelopment and cultivation of approximately 74,000 hectares of oil palm plantation inKabupaten Kapuas and Barito Selatan, Kalimantan Tengah, Republic of Indonesia ("ProposedJV").The SPS Agreement will involve a total cash consideration of up to USD116,000,OOOcomprising the following:(i ) Up to USD66,000,000 for the proposed acquisition of 495 ordinary shares of JV Co

("JV Co Shares") representing 49.5% equity interest in JV Co by the Purchaser fromthe Vendor ("Proposed Acquisition"): and(ii) USD50,000,000 for the proposed subscription by the Purchaser of a further 371 new

JV Co Shares representing 27.1% of the enlarged share capital of JV Co ("ProposedSubscription").

Upon completion of the Proposed Acquisition and Proposed Subscription (collectively referredto as the "Proposed Acquisition and Subscription"), the Purchaser's equity interest in JV Co willbe 63.2% based on the enlarged share capital of JV Co. The Proposed Acquisition andProposed Subscription are inter-conditional upon each other.The Proposed JV will be undertaken by JV Co's Indonesia incorporated subsidiaries("Indonesia Subsidiaries") held via JV Co's Singapore incorporated subsidiaries ("SingaporeSubsidiaries"), whereby upon the completion of the SPS Agreement. GENP wil l have effectiveshareholdings of 60% in the Indonesia Subsidiaries. The Vendor, on the other hand, will haveeffective equity interest of 40% in the Indonesia Subsidiaries comprising an indirect interest of35% held through the Singapore Subsidiaries and a direct interest of 5% in the IndonesiaSubsidiaries.

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2. DETAILS OFTHE PROPOSEDJV

2.1 Salient terms of the SPSAgreement

(i) Proposed Acquisition

The Vendor has agreed that it shall sell and the Purchaser has agreed that itshall purchase 495 JV Co Shares ("Sale Shares") comprising 49.5% of theenlarged issued share capital of JV Co for a cash purchase price of up toUSD66,OOO,OOO"Purchase Price"), free from all encumbrances and togetherwith all rights, benefits, title to, interest in and entitlements attaching thereto.

(ii) Proposed Subscription

The Purchaser shall subscribe for 371 new JV Co Shares ("SubscriptionShares") representing 27.1% of the enlarged issued and paid-up share capitalof JV Co for cash subscription price of USD50,OOO,OOO"Subscription Price").The Subscription Shares shall be issued and credited as fully paid-up and shallrank pari passu with the existing JV Co Shares.Upon completion of the Proposed Acquisition and Subscription, the enlargedissued and paid-up share capital of JV Co will be USD1,371 comprising 1,371ordinary shares whereby the Purchaser will hold 866 JV Co Sharesrepresenting 63.2% of the enlarged share capital of JV Co, while the remaining505 JV Co Shares (or 36.8%) will be held by the Vendor.The proceeds of the Subscription Price will be utilised by JV Co for capitalexpenditure and working capital purposes and/or to repay any debts andborrowings of JV Co and its subsidiaries ("JV Co Group").

(iii) Corporate structure of the Proposed JVThe Singapore Subsidiaries comprise five (5) Singapore incorporatedsubsidiaries under JV Co, namely Global Agri Investment Pte Ltd ("GAl"), AsiaPacific Agri Investment Pte Ltd ("APAI"), South East Asia Agri Investment PteLtd ("SEAAI"), Transworld Agri Investment Pte Ltd ("TAl") and Universal AgriInvestment Pte Ltd ("UAI").The Indonesia Subsidiaries comprise three (3) Indonesia incorporatedsubsidiaries, namely PT Globalindo Agung Lestari ("PTGAL") held under GAlwith equity interest of 93.8%, PT Globalindo Mitra Abadi Lestari ("PTGMAL")held under APAI with equity interest of 95.0% and PT Globalindo InvestamaLestari ("PTGIL") held under SEAAI with equity interest of 95.0% respectively.GAl is in the process of completing the Vendor's restructuring, of acquiring1.2% from affiliates of the Vendor so that GAl will hold 95% equity interest inPTGAL.

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UAI on the other hand, had on 30 March 2012 entered into Sale and PurchaseAgreement ("Conditional SPA") to acquire 95% equity interest of PT GlobalindoSawit Lestari ("PTGSL") from affiliates of the Vendor, and the Conditional SPAis still conditional as at the date of this announcement. Further details on theConditional SPA are set out in Section 3.1 of this announcement.For illustration purpose, the corporate structure diagram of JV Co Group uponcompletion of the Proposed Acquisition and Subscription is set out inAppendix I of this announcement.

(iv) Loan facility and share pledgePTGAL, one of the Indonesian Subsidiaries, has a loan facility ("PTGAL Loan")with an Indonesian bank ("Lending Bank") amounting to Rp427 billion (orUSD47.5 million) and the shares of PTGAL ("PTGAL Shares") have beenpledged to the Lending Bank as security.Consent from the Lending Bank is required to facilitate the completion of theProposed Acquisition and Subscription. With the change of control, theLending Bank may also ask for pledge of shares in GAl, the holding companyof PTGAL, as part of the security.In addition, the Purchaser will also require a pledge over the shares in GAl andPTGAL as security for the payment of the refundable deposit under theProposed Acquisition which is set out in Section 2.1(vi)(a)(aa) below.

(v) CompletionCompletion of the SPS Agreement will take place seven (7) business daysafter fulfilment of all the following conditions precedent unless otherwisewaived by the Purchaser ("CP Fulfilment Date"), which shall not be later than30 June 2012 ("Completion Date"):(a) the completion of legal and financial due diligence exercise;(b) the receipt by the Purchaser of a schedule of all third party liabilities as

at the CP Fulfilment Date;(c) the receipt by the Purchaser of such licences, permits, approvals,

consents and others in order to consummate the transactionscontemplated under the SPS Agreement;

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(d) the completion of the pledge of the ordinary shares of GAl and PTGALto the Lending Bank as well as the Purchaser and the consent from theLending Bank being obtained in connection with the transactioncontemplated under the SPS Agreement;

(e) the approval of Bank Negara Malaysia having been obtained, ifrequired, for the remittance of funds in relation to the payment of thePurchase Price and Subscription Price;

(f) the completion of the restructuring of JV Co' shareholdings in itssubsidiaries;

(g) the issued and paid-up share capital of JV Co being increased toUSD1,000 representing 1,000 JV Co Shares;

(h) the receipt by Purchaser of such licences, approvals or permits toenable each Indonesian subsidiary to undertake the Proposed JV andcommence commercial operations, including without limitation theLocation Permit (Izin Lokasl), Plantation Business License (Izin UsahaPerkebunan), Permanent Business License and the EnvironmentalLicences which have been issued or renewed, where applicable andare in effect; and

(i) the completion of the Conditional SPA.

(vi) The Purchase Price(a) The Purchase Price shall be payable in the following manner:

(aa) a refundable deposit of USD20,OOO,OOOs payable to theVendor within five (5) business days of the date of fulfilment ofthe conditions precedent set out in Section 2.1(v)(d), (e), (f)and (g); and

(bb) the balance purchase price of up to USD46,OOO,OOOs payableto the Vendor on Completion Date subject to adjustmentsdepending on the actual planted and plantable area to bemutually agreed upon by the parties, taking into considerationany outstanding third party liabilities, the prevailing stage ofplanting and the conditions of planting.

(b) The total Purchase Price and Subscription Price of up toUSD116,OOO,OOOwas arrived at based on a willing-buyer willing-sellerbasis after taking into consideration the size of the planted andplantable area, the prevailing stage of planting and the conditions ofplanting as well as future earnings and cash flows potential of JV CoGroup.

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(c) The Purchase Price and Subscription Price will be funded entirely frominternally generated funds of GENP and its subsidiaries ("GENPGroup").

2.2 Joint Venture Agreement ("JVA")

Upon completion of the SPS Agreement, the Purchaser and the Vendor will enter into aJVA to regulate the conduct of business and affairs of the JV Co Group. Under theJVA, while the Purchaser shall be responsible for all technical, operational and financialaspects of the Proposed JV, the Vendor shall be responsible for sourcing of suitablelandbank, acting as key liaison between JV Co and the local communities andauthorities, including advising JV Co on labour and social matters.

The JV Co shall procure its respective Indonesia Subsidiaries to enter into GeneralManagement Agreements with GENP or its designated nominee whom shall beappointed as the sole and exclusive provider of general management andadministrative services covering plantation operations, oil mill operations, sales andmarketing and other administration services to the Indonesia Subsidiaries.

2.3 Plantation Development Agreement ("PDA")

The JV Co had on 7 January 2012 entered into a PDA with Great Seven InternationalInvestments Company Limited ("GSI"), a company which is part of STH Group asfurther set out in Section 3.2 of this announcement, for GSI to provide services to assistJV Co and its subsidiaries (except for PTGAL), in, inter-alia, obtaining the requiredapprovals to carry out plantation development activities with minimal interruption fromthe local communities.In consideration of the provision of services, JV Co agreed to pay USD1,000 perhectare calculated with reference to the new planted area to be determined by JV Cosubject to an aggregate of not more than USD20 million. The new planted area refersto areas in the land (except for land belonging to PTGAL) which are planted with oilpalm in compliance with the Indonesian laws, regulations, requirements and acceptableindustry standards.

The PDA is for duration of five (5) years from the date of the PDA extendable by mutualagreement of the parties.2.4 Others

(i) There are no liabilities, including contingent liabilities and guarantees, to beassumed by GENP Group arising from the Proposed Acquisition andSubscription.

(ii) Under Indonesian regulations, the Indonesia Subsidiaries shall allocate aminimum of 20% of the plantable area to be developed for the communities.

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3. INFORMATION ON JV CO GROUP, VENDOR AND PURCHASER

3.1 Information on JV Co GroupJV Co was incorporated in Singapore on 5 December 2011 under the laws ofSingapore. The present issued and paid-up share capital of JV Co is USD1 comprising1 ordinary share. JV Co is principally an investment holding company.

The Singapore Subsidiaries are principally investment holding companies and itsrespective sole asset is the investment in the respective Indonesia Subsidiaries. Savefor PTGAL, the remaining companies of the Indonesia Subsidiaries are currentlydormant. The information on the subsidiaries of JV Co is set out in Appendix II of thisannouncement.As mentioned in Section 2.1 (iii) of this announcement, UAI had on 30 March 2012entered into a Conditional SPA to acquire 95% equity interest of PTGSL forapproximately USDO.27 million (or Rp2.4 billion) from affiliates of the Vendor. TheConditional SPA is subject to the fulfilment of, amongst others, the following conditionsprecedent:

(i) PTGSL having obtained the Izin Arahan Lokasi and Izin Lokasi for the landmeasuring 16,323 hectares in Kecamatan Dadahup, Kabupaten Kapuas,Kalimantan Tengah ("PTGSL Land");

(ii) completion of the legal and financial due diligence exercise; and

(iii) the receipt by UAI of such licences, approvals or permits to enable PTGSL tocommence commercial operations.

With regards to the PTGSL Land, the Vendor covenants to facilitate planting anddevelopment of the land with minimal native disruptions and the JV Co will makepayment of USD800 per hectare upon planting of oil palm on the PTGSL Land.

The information on PTGSL is set out in Appendix II of this announcement.

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The information on the Izin Lokasi, planted area and location of the Izin Lokasi held bythe Indonesia Subsidiaries is set out below:

Holding company GAl APAI SEMI UAI TotalIndonesia subsidiary held PTGAL PTGMAL PTGIL 'PTGSLIzin Lokasi (ha) 29,850 13,461 14,756 #16,323 74,390Planted area (ha)-Inti 14,150 - - - 14,150-Plasma 4,195 - - - 4,195-Total 18,345 - - - 18,345Location-Kecamatan Kapuas Jenamas Jenamas Dadahup

Murung and Dusun and Dusunand Hilir HilirMantangaifDusun Hilir

-Kabupaten Kapuasl Barito Barito KapuasBarilo Selalan SelatanSelatan

-Provinsi Kalimantan Kalimantan Kalimantan KalimantanTengah Tengah Tengah Tengah

Notes:Upon completion of the Conditional SPA, PTGSL will become 95% owned subsidiary of UAI.The Vendor is in the process of obtaining the Izin Lokesi for the land.

Save for PTGAL, JV Co and its remaining subsidiaries as well as PTGSL do not haveany audited financial statements as at the date of this announcement. The loss for thefinancial year and net assets of PTGAL based on the audited financial year ended 31December 2010 are Rp4,760 million and Rp18,510 million respectively (or RM1.6million and RM6.2 million respectively at the exchange rate of RM1:Rp3,OOOforillustration purposes only).

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3.2 Information on the VendorThe Vendor was incorporated under the laws of British Virgin Islands on 13 February2008. The present issued and paid-up share capital of the Vendor is USD1 comprising1 ordinary share. The Vendor is principally an investment holding company.

The Vendor is part of Sin Tek Huat Group ("STH Group") in Indonesia. STH Group isprincipally involved in the business of development and cultivation of oil palmplantations with its planted area and oil mills in Indonesia located in Jambi, NorthSumatera, Banten in West Java, West Kalimantan and Central Kalimantan covering atotal area of about 58,600 hectares.

3.3 Information on the Purchaser

The Purchaser was incorporated in Malaysia under the Companies Act, 1965 on 3January 2012. The present authorised share capital of the Purchaser is RM100,OOOcomprising 100,000 ordinary shares of RM1.00 each of which 2 ordinary shares havebeen issued and fully paid-up. The Purchaser is principally an investment holdingcompany.

4. RATIONALE FORTHE PROPOSED JV

The Proposed JV is in line with GENP's long term strategy to increase its interest in the palm oilindustry, consistent with its confidence in the continued growth prospects of the industry. TheProposed JV represents another positive step by GENP Group towards realising its vision ofestablishing itself as a major player in the industry.

The Proposed JV will increase GENP Group's plantation landbank in Malaysia and Indonesiaby 74,390 hectares from its present 165,560 hectares to 239,950 hectares. It will also expediteGENP Group's upstream expansion as some 14,150 hectares (under Inti) have already beenplanted. The Proposed JV represents a strategiC investment by GENP which is expected tocontribute positively to the earnings as well as shareholders' value of the Company in thefuture.

5. APPROVALS REQUIREDSave for the approval of Bank Negara Malaysia to be obtained, if required, for the remittance offunds in relation to the payment of the Purchase Price and Subscription Price, the ProposedAcqulslfion and Subscription is not subject to any approval from GENP's shareholders or anyother regulatory authorities.

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6. INDUSTRY PROSPECTS

The future prospects of the oil palm business are expected to be reasonably positive mainlydue to the following:(i) the expected sustained growth in the demand for edible oils in tandem with the

increase in the world population;(ii) the increasing share of palm oil in the edible oils market in view of its nutritional

qualities and health attributes;(iii) the viability of crude palm oil conversion to biodiesel underpinned by environmental

benefits and high prices of fossil fuel; and

(iv) the competitiveness of palm oil in terms of yield and cost efficiency as compared toother edible oils.

7. RISK FACTORS

The Board of GENP does not foresee any extraordinary or material risk factors pertaining tothe Proposed JV save for the business/operating risks normally associated with the oil palmindustry, in which the GENP Group is already involved as well as political and regulatory risksassociated with any venture in a foreign country as follows:

(i) Risks relating to operating in Indonesia(a) Changes in trade, import and export policies and tariffs

Any material changes in the Indonesian import policies on fertiliser, plant andequipment or export duty on palm products or similar or related actions by therelevant governments may cause significant disruption to operations and mayadversely affect GENP Group's profitability.

(b) Various risks relating to ownership and acquisition of land

Changes in the regulations or any new regulations imposed by IndonesianGovernment in relation to the ownership and acquisition of land may affect theability of GENP Group to maintain and renew all necessary licences in relationto the existing [and owned and/or controlled by GENP Group and in thecertification process for obtaining Hak Guna Usaha, which may adversely andmaterially affect GENP Group's business and financial performance.

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(c) Indonesia is located in an earthquake zone and is subject to significantgeological and meteorological risks that could lead to social andeconomic unrest

The Indonesian archipelago is one of the most volcanically active regions inthe world. As it is located in the convergence zone of three major lithosphericplates, it is subject to destructive tsunamis (or tidal waves) and earthquakes.A significant earthquake or other geological disturbance in any of Indonesia'smore populated cities and financial centres could severely disrupt theIndonesian economy, thereby may materially and adversely affect GENPGroup's business and operations.

(ii) Inherent business risk in the plantation industry

As with other palm oil producers, GENP Group is subject to risks inherent to theplantation industry, which include but not limited to changes in global, regional andnational economy, competition from existing and new producers, changes in weatherconditions, fluctuation in commodity prices, changes in consumer tastes, outbreak ofpests and crop diseases, changes in technology, increase in production, labour andstorage costs, and changes in business and credit conditions.

(iii) Fluctuations in crude palm oil and palm kernel pricesThe performance of GENP Group is dependent on the crude palm oil ("CPO") andpalm kernel ("PK") prices in the oil palm industry at any particular time. As a globallytraded commodity, the fluctuation in oil palm prices correlates with the demand andsupply of the vegetable oils and fats market thereby giving rise to volatile pricemovements.Additionally, the prices of CPO and PK are also exposed to fluctuations in exchangerate as the trade and exports of the nation's crude and processed palm oil productsare carried out primarily in US Dollars.

(iv) Changes in general economic, legislative, political and business conditions

The future performance of the Proposed JV is subject to the economic, political,regulatory, taxation and environmental conditions of the Republic of Indonesia.Changes to these conditions as well as other changes to the operating environmentmay adversely affect the performance of the Proposed JV. Further, the repatriation ofthe investment and potential profits derived by GENP Group from the Proposed JV willalso be subject to the relevant policies of the Indonesian government as at the point ofrepatriation. The impact of the results of the Proposed JV to GENP will also bedependent on the exchange rate between Rp to RM prevailing on the relevant dates.

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8. FINANCIAL EFFECTS8.1 Issued and paid-up share capital and major shareholders' shareholdings

The Proposed JV will not have any effect on GENP's issued and paid-up share capitaland major shareholders' shareholdings.

8.2 Net Asset and GearingThe Proposed JV will not have any material effects on GENP Group's net assets andgearing.

8.3 Earnings

The Proposed JV will not have any material effect on the earnings of GENP Group forthe financial year ending 31 December 2012. However, the Proposed JV is expectedto contribute positively towards the earnings of GENP Group in the long term.

9. DIRECTORS' AND MAJOR SHAREHOLDERS' INTERESTNone of the directors and major shareholders of GENP and/or persons connected with themhas any interest, direct or indirect, in the Proposed JV.

10. DIRECTORS'RECOMMENDATIONThe Board of Directors of GENP after having considered all aspects of the Proposed JV, is ofthe opinion that the Proposed JV is in the best interest of GENP.

11. PERCENTAGE RATIOS UNDER PARAGRAPH 10.02(g) OF THE MAIN MARKET LISTINGREQUIREMENTS OF BURSA MALAYSIA SECURITIES BERHAD ("LISTINGREQUIREMENTS")Pursuant to paragraph 10.02(g} of the Listing Requirements, the highest percentage ratioapplicable to the Proposed Acquisition and Subscription is 12.1%, based on GENP's auditedconsolidated financial statements for the financial year ended 31 December 2010.

12. COMPLIANCE WITH AND DEPARTURE FROM THE GUIDELINES ON THE OFFERING OFEQUITY AND EQUITY-LINKED SECURITIES ISSUED BY THE SECURITIES COMMISSION(USCGUIDELINES")The Board is not aware of any departure from the SC Guidelines in relation to the ProposedJV.

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13. ESTIMATED TIME FRAME FOR COMPLETIONThe Proposed JV is expected to be completed by the end of second quarter of 2012.

14. DOCUMENTS FOR INSPECTIONThe SPS Agreement and Conditional SPA will be available for inspection at the registeredoffice of the Company during normal office hours on any working day for a period of three (3)months commencing from the date of this announcement.

This announcement is dated 13April 2012.

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