M.P. Evans Plc – Investment in new Indonesian oil-palm project

The land to be acquired by the Group comprises 8,240 hectares. Of this area, 7,400 hectares are young oil palms, planted mainly in 2012-16, and a further 400 hectares are in the course of being planted. Soil conditions, vegetation, terrain and climate are highly suitable for oil-palm development. The land is held under a 35-year renewable Hak Guna Usaha (“HGU”) land licence in the name of BMA. The Group will be paying US$88.0 million in cash to acquire Sunrich, which is a privately-held Singapore company. In addition, the Group will take on some US$20.0 million of bank debt currently owing by BMA. Sunrich is being acquired from two individuals, FR Limus, a Malaysian resident, and N Vrajilal, a Singapore resident, and a privately-held Singapore company, Tishros Pte Ltd. The purchase price is subject to an adjustment following completion to reflect any change in working capital as compared with an agreed estimated figure. The purchase consideration is based on a price of US$13,200 per planted hectare. As would be expected from such a young estate only just coming into harvesting, the audited accounts for BMA show it made an operating loss of US$0.4 million during 2016 and a profit for the year (after financial items, other income, gains on exchange and tax) of US$1.0 million.

In addition to the land which is to be acquired by the Group, as required by law in Indonesia a smallholders' scheme comprising at least 20% of the project hectarage is in operation. Some 1,300 hectares have been planted and allocated to the scheme, which will be sold to a smallholder co-operative at its cost of development. The co-operative's land will be managed by the Group and the oil palm fresh fruit bunches (“f.f.b.”) from the smallholder areas will be sold to the Group. The Group plans to build a palm-oil mill to process f.f.b. from both the Group's project and the smallholders' area. The land is not currently registered with the Roundtable on Sustainable Palm Oil (“RSPO”), and the Group will begin this process immediately after completion.

The board expects, given the young age of its palms, that BMA's crop from Group and smallholder areas should grow steadily from the point of acquisition to exceed 270,000 tonnes of f.f.b. per annum within ten years. The acquisition of BMA follows the sale in January 2017 of the Group's 36.84% share of a joint-venture in Bengkulu, PT Agro Muko (“Agro Muko”), for US$100 million. The Group's share of Agro Muko amounted to 7,200 hectares with an average age of 13 years. The addition of BMA is expected to extend and sustain the anticipated acceleration of growth in crops from the Group's existing young projects in Bangka and East Kalimantan.

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