By S BIRRUNTHA / Pic by BLOOMBERG

XL Holdings Bhd has proposed to acquire 100% stake in a pineapple plantation company, Ergobumi Sdn Bhd, for a total cash consideration of RM40 million.

In a filing to Bursa Malaysia yesterday, the group said it has entered into a deal with Lee Kok Soon and Edmund Chan Seng Kee to buy their entire equity stake in Ergobumi.

It added that upon completion of the proposed acquisition, Ergobumi will become a wholly-owned subsidiary of XL Holdings.

The group said the proposed acquisition is expected to be completed by the fourth quarter of 2021 (4Q21).

“As part of the group’s continuous strategy to improve the group’s financial performance and enhance the shareholders’ value, the group is eyeing to diversify into other agriculture-based businesses which include, among others, the planting of fruits and vegetables.

“The proposed acquisition represents an opportunity for the group to pursue its diversification strategy with profitable fruits and vegetables plantation as Ergobumi has been profitable for the last three financial years,” it noted in a statement.

Additionally, XL Holdings said this also enables the group to tap into a plantation with immediate producing fruits and vegetables as compared to a new plantation to be developed by the group which requires a gestation period of approximately 48 months as new plantation will require, amongst others, land acquisition, setting up of infrastructures and operations team.

In view of this, the group said the proposed acquisition will contribute positively to the group’s prospects and earnings.

Speaking on outlook, XL Holdings noted that the vegetables market in Malaysia is considered a mature market that has a long-standing presence in the country with vegetable farming activities widely undertaken throughout the country.

It added that in terms of external trade, Malaysia is a net importer of vegetables.

“In 2019, Malaysia registered a trade deficit of RM3.64 billion, with total exports amounting to RM1 billion while total imports stood at RM4.64 billion.

“In 2020, the planted area and production of vegetables is estimated to be measured at 64,219 hectares and 1.1 million tonnes, respectively,” the group said.

XL Holdings, is an investment holding company, which engages in the breeding and trading of Asian Arowana and other ornamental fish primarily in Malaysia.

The group has also ventured into the trading and distribution of edible bird nests previously.

Shares of XL Holdings closed four sen or 5.33% higher at RM0.79 today, for a market capitalisation of RM72.23 million.