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Is Halcyon Agri Corporation Ltd Being Taken Over?

On 12 January 2016, Halcyon Agri Corporation Ltd (SGX: 5VJ) saw its share price shoot up by 10% to S$0.69 before trading was halted near the end of the day. As of the time of writing today (1:28 pm), the trading halt is still in place.

According to an article published by the Wall Street Journal yesterday morning, there are rumours that Sinochem Group, one of China’s largest fertilizer and rubber suppliers, is in talks to buy Halcyon Agri.

Sinochem is no stranger to acquiring Singapore-listed companies. In 2008, Sinochem had bought a 51% stake in GMG Global Ltd (SGX: AXJ), an integrated natural rubber producer whose business spans the planting of rubber trees to the global distribution of processed rubber products.

Halcyon Agri is in a similar line of business to GMG Global – it is a leading natural rubber supply chain manager, with plantations and processing plants in Indonesia and Malaysia.

In the 12 months ended 30 September 2015, Halcyon Agri had recorded a sizeable revenue of US$1.07 billion though its net income was only US$6.3 million. The company also seems to have a stretched balance sheet as its net debt to equity ratio stood at 732% as at 30 September 2015.

If Sinochem is successful in taking over Halcyon Agri, it would make the combined company an even larger rubber producer on the global stage. In 2014, Sinochem owned 80,000 hectares of natural rubber plantation. Halycyon Agri’s 10,000 hectares of rubber plantation would boost Sinochem’s plantation size by 12.5%.

Foolish Summary

At this point in time, there is still no confirmation from Halcyon Agri about the acquisition nor its reason for the trading halt. Halcyon Agri is currently valued at S$410 million after its 10% rally on Tuesday. That would give the company a price-to-earnings ratio of 32 and price-to-book ratio of 3.8.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn’t own shares in any companies mentioned.