KUALA LUMPUR: IOI Corporation Bhd's RM50 million annual loss in contribution arising from the sale of its stake in Bunge Loders Croklaan Hogeweg (BLC) is minimal given the company's substantial earnings base.
Hong Leong Investment Bank Bhd (HLIB Research) said that IOI Corp shared that the existing business collaboration between IOI Corp and Bunge Ltd remains, and both parties will continue to harness the benefits of the existing synergistic partnership in expanding BLC's business.
On August 5, IOI Corp announced the disposal of the 10 per cent stake in BLC, which is non-core in nature, to Bunge's wholly-owned subsidiary Koninklijke Bunge BV (KBBV) for RM466 million.
KBBV and IOI Corp agreed on a shareholders' agreement (SHA) in 2018, and the share sale value is based on the mechanism for the put and call options specified in the SHA.
With the completion of the share sale, IOI Corp's stake in BLC has been reduced to 20 per cent (from 30 per cent previously), and accordingly, the existing put and call options provided in the SHA have been terminated.
IOI Corp acquired the entire business of BLC from Unilever Plc and Unilever NV for RM814 million in 2002.
Subsequently, in September 2017, IOI Corp entered into a definitive share purchase agreement with KBBV to dispose of a 70 per cent stake in BLC and its related businesses to KBBV for RM3.79 billion.
HLIB has maintained its 'Buy' call on IOI Corp, with an unchanged target price of RM4.36 pending further updates in its upcoming results briefing.