REA subsidiary to sell 95pc interest in PBJ palm oil plantations

REA Holdings announced on Wednesday that its subsidiary, PT REA Kaltim Plantations, has entered into a conditional agreement for the sale of its 95% interest in PBJ to Kuala Lumpur Kepong (KLK).

The London-listed firm said the agreement remained conditional on REA shareholder approval, as well as necessary regulatory consents in Indonesia and the consent of REA Kaltim's lending bank.

It said the disposal would enable the group to release the intrinsic value that had built up in developing PBJ, which - as a recently planted property- had “excellent potential” but was not currently profitable, the board explained.

The sale was expected to realise gross proceeds of approximately $85m, and net proceeds of approximately $57m, after repayment of external borrowings and net of selling expenses.

REA said the divestment would benefit its capital structure by reducing indebtedness, and by relieving the group of the further investment that would be required to take the PBJ estates to full maturity.

It would also defer the need for a further group oil mill for at least three years.

“The divestment will permit the group to focus its efforts on its remaining plantings which are concentrated within a single geographical area,” the REA board said in its statement.

“There will be no material negative impact on the immediate outlook for the REA group's financial performance.”