Malaysia to create world’s biggest palm oil firm

28 November 2006 06:10  [Source: ICIS news]

SINGAPORE (ICIS news)--CIMB Investment Bank (CIMB) late on Monday proposed creating the world’s largest listed oil palm plantation by merging Malaysia’s Sime Darby, Golden Hope Plantations and Kumpulan Guthrie in a deal valued at ringgit (M$) 31bn ($8.5bn).

The proposal involves merging the businesses of eight listed companies in which Malaysia’s state investment agency Permodalan Nasional (PNB), unit trust funds under its management and the Employees Provident Fund (EPF) are the major shareholders.

A special purpose vehicle, Synergy Drive, has made an offer to acquire all the businesses, including the assets and liabilities of the eight listed companies, the Malaysian bank said in a statement.

Synergy Drive is a special purpose vehicle held by two trustees for a charitable purpose. CIMB added that it will provide initial financing for Synergy Drive.

The eight listed entities are Sime Darby, Sime Engineering Services, Sime UEP Properties, Golden Hope Plantations, Mentakab Rubber, Kumpulan Guthrie, Guthrie Ropel and Highlands & Lowlands.

The proposal would also result in a mandatory general offer being triggered on Negara Properties, a subsidiary of Golden Hope.

"We see value in the creation of a global leader in oil palm plantations, with a potential total annual revenue of over M$26bn, a combined workforce of over 107,000 and total plantation land of approximately 600,000 hectares (6m km2) located in Malaysia and Indonesia," said Nazir Razak, chief executive officer of CIMB, in the statement.

With total plantation land of about 6m km2, the proposed merger could result in the new oil palm plantation entity producing some 9m tonnes of fresh fruit bunches and 2.5m tonnes of palm oil, with the latter representing 5% to 6% of global production.

Nazir noted that there are "significant cost and revenue synergies" to be obtained by merging these assets into a single entity that will run five core businesses – plantations, its largest segment, along with motor vehicles, heavy equipment, property, and energy and utilities.

Synergy Drive’s proposed offer price for the nine companies was a consistent 5% premium to the closing price of the last trading day prior to suspension of each counter.

The deal is expected to be completed by the fourth quarter of 2007.

Upon completion of the merger, Synergy Drive would seek a listing on the Main Board of Bursa Securities while all the companies which businesses have been acquired would be delisted.

Upon approval by shareholders, Synergy Drive’s share capital would be approximately 6bn ordinary shares of M$0.50 each.

Based on merger exchange price of M$5.25 per share, market capitalisation of the new entity would be M$31.4bn, propelling it instantly into one of Malaysia’s top five listed companies.

($1 = M$3.6)

ICIS Copyright © Reed Business Information 2009

Author: Jeanne Lim
+65 6780 4359

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