FOCUS: Wilmar to become stronger after merger

15 December 2006 04:42  [Source: ICIS news]

By Jeanne Lim

SINGAPORE (ICIS news)-- Analysts have given Wilmar International’s proposed $4.3bn acquisition to form the world’s second largest palm oil maker the thumbs up on Friday, saying that it would reap benefits from the integration.

The enlarged Singapore-based integrated agribusiness group could also rival Synergy Drive in terms of plantation land with 573,405 hectares of oil palm land, Citigroup analyst Andrew Chow said in statement on Friday.

"However, the Wilmar merger would have a stronger downstream business and entrenched position in strong growth markets such as China," Chow said.

Wilmar said on Thursday it planned to merge with the Kuok group’s palm plantation, edible oils, grains and related businesses in a deal worth up to $2.7bn.

These businesses are held by PPB Oil Palms, PGEO Group and Kuok Oils and Grains.

In a separate deal, Wilmar would also acquire the edible oils, grains and related businesses of its parent company Wilmar Holdings, including interests held by Archer Daniels Midland Asia Pacific and its subsidiaries for $1.6bn.

US-based Archer Daniels Midlands also planned to increase its stake in Wilmar and become its second largest shareholder.

Synergy Drive is the $8.6bn proposed merger of three Malaysian state-controlled plantation firms Sime Darby, Kumpulan Guthrie and Golden Hope to create the world’s No 1 palm oil group. The companies own a total 600,000 hectares of oil palm land in Malaysia and Indonesia.

Most analysts gave the Wilmar merger thumbs up. Its shares, which were suspended from trading on Wednesday and Thursday, rose 24% to Singapore dollar 2.12 ($1.38) on Friday at 0340 GMT.

Goldman Sachs upgraded Wilmar to its Buy list, from a previous Neutral rating, as it was "positive" on the proposed merger.

"The proposed acquisitions form a strong strategic fit with Wilmar’s current business," said Goldman Sachs. The deal would bring about strong potential synergies and a high-growth business portfolio, it added.

On Wilmar’s offer for PPB Oil Palms, JP Morgan said it would be attractive for PPB Oil shareholders to take part in the merged entity of Wilmar.

"PPB’s upstream plantation business will complement Wilmar’s predominantly downstream operations, namely refining and biodiesel," the investment bank said.

Credit Suisse analyst Tan Ting Min maintained an outperform rating on Wilmar, saying that the company would reap benefits from operating an entire integrated palm oil chain.

($1 = S$1.54)

By: Jeanne Lim
+65 6780 4359

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