MARC will assess the credit implications of Sime Darby Berhad’s (Sime Darby) proposed acquisition of a 48.97% stake in New Britain Palm Oil Limited (NBPOL) on the plantation group’s financial metrics pending full information on the acquisition deal. The impact of the acquisition on Sime Darby’s current ratings will be factored in the forthcoming annual rating review. In the meantime, the ratings on Sime Darby’s RM4.5 billion Islamic Medium Term Notes programme and RM500 million Islamic Commercial Papers (IMTN/ICP) with a combined limit of RM4.5 billion are maintained at AAAID/MARC-1ID with a stable outlook.

Sime Darby will acquire the sizeable stake in NBPOL from Kulim (Malaysia) Berhad. Both parties are expected to finalise the acquisition terms by end-September 2014, which could be extended. MARC understands the acquisition is expected to be funded through a combination of existing cash and borrowings of about RM2.1 billion based on NBPOL’s current share price. However, the total costs could potentially increase should Sime Darby be required to make a general offer for the remaining shares in NBPOL.

MARC notes that while Sime Darby has sufficient liquidity and financial flexibility to undertake the acquisition, any sharp increase in borrowings without concomitant measures to reduce its leverage could weaken group credit metrics to a level that may not commensurate with the current ratings. This notwithstanding, Sime Darby’s considerable market position in the palm oil industry will be further strengthened by the acquisition of NBPOL which is a well-established integrated palm oil producer with some 79,800 hectares of planted oil palm estates among other plantation-related businesses. NBPOL’s financial performance, cash flow generation ability and dividend upstream capability are some of the main factors MARC will assess in addressing the impact of the acquisition on Sime Darby group. 

Contacts:
Jasmine Kua, +603-2082 2280/ jasmine@marc.com.my;
Taufiq Kamal, +603-2082 2251/ taufiq@marc.com.my.