Merged plantation giants will form formidable group
Malaysiakini.com
Nov 24, 2006

Deputy Premier Najib Abdul Razak said an upcoming merger of three plantation conglomerates will see the rise of a "formidable group" amid strengthening global demand for palm oil.

Malaysia's market is buzzing over news of the merger of government-linked listed companies Golden Hope Plantations, Sime Darby and Kumpulan Guthrie after all three suspended trade in their shares on Thursday.

"They will form a formidable group of previously separate companies under one organisation," Najib told reporters in the first direct confirmation of the exercise.

Analysts say the merger will be the country's largest corporate exercise and see the creation of the world's largest listed palm oil producer.

"The idea was thought of recently and it has taken its course," Najib said.

"The prospects look good and palm oil prices appear to be strengthening and the futures (contracts) look very positive," he said, when asked the reason for the move.

Najib would not divulge details on the merger which he said would be formally announced on Monday Nov 27, but said it was "the right time" to consolidate the plantations.

Crude palm oil prices have performed strongly in recent months, trading at RM1,400 per tonne here over the first six months of the year and then rising to RM1,800 in the last month.

Analysts say the rise is due to supply fears with Malaysia and Indonesia, the world's top producers of crude palm oil, stockpiling for the creation of biodiesel, and the impact of the El Nino weather system on crops.

Demand is also increasing for palm oil in the United States where it is seen as a healthier edible oil since it has a lower percentage of trans fatty acids, linked to heart disease, compared to most other cooking oils.

Second to Felda

Najib said investment giant CIMB Group will drive the transaction and that the merged entity will eventually be part of the government's national investment fund, Permodalan Nasional Bhd (PNB), which already controls the three companies.

"The principle is to consolidate the management of plantation activities under one organisation which PNB manages," said Najib, who is a PNB trustee and brother of CIMB chief executive officer Nazir Razak.

Once merged, the three plantations will have a combined market capitalisation of US$7.23 billion and employ about 93,000 people.

The combined plantation estate will amount to about 600,000 hectares, according to analysts, second only to the world's top palm oil producer, Malaysia's state-owned plantation giant Felda.

The Federal Land Development Authority (Felda) manages more than 800,000 hectares but is not listed on the Malaysian stock market.

Malaysia is the world's largest producer of palm oil, accounting for about half of global output and aims to be a top player in biodiesel.
    
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