Asian Citrus Hldgs (LON:ACHL) , the Chinese based orange citrus plantation holder which is the largest orange plantation owner and the single largest orange producer in China, have today announced that they have entered into a Memorandum of Understanding to acquire a citrus fruit plantation located in Fuchuan County (part of the Guangxi Zhuang Autonomous Region in China). The MOU is with with Guangxi Lixin State Owned Farm - according to the RNS:

The Vendor is considered to be one of the largest owners and operators of citrus fruit plantations in the PRC

Before discussing a little bit about what this could mean for Asian Citrus, first let’s review exactly what a Memorandum of Understanding (MOU) is. A MOU is not an actual legally binding contract; it is more a statement of intention, basically a more advanced version of a gentlemen’s agreement (click here for more on MOUs).

Under the Memorandum of Understanding, the Vendor has agreed that it will not negotiate with any third party for the sale and transfer of the plantation up to 31 January 2011. The Board wishes to emphasize that no legally binding agreement in relation to the Proposed Acquisition has been entered into as at the date of the announcement. The final terms of the Formal Agreement (if any), including but not limited to the consideration, in relation to the Proposed Acquisition, have yet to be determined and finalised.

It should be noted that MOUs do sometimes have binding powers like a contract. So, if the Vendor breaks the agreement stated not to speak to third parties, then Asian Citrus could possibly have a case against them but no detail on this is given in the RNS unfortunately.

As the Proposed Acquisition may or may not proceed, public investors and the shareholders of the Company are urged to exercise caution when dealing in the shares of the Company.’

So, assuming that this deal does happen, what could it mean for Asian Citrus? For a start, they could see a big boost to their production figures thus increasing, as stated in the RNS, revenue and profit.

The plantation consists of approximately 1.1 million citrus fruit trees and ancillary facilities and occupies a land area of approximately 10,000 mu (approximately 6.67 sq.km). The plantation is currently…

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