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Plantation Merger & Acquisition Heating Up



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Dec 08 2006
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Less than a month after the mega-merger of Kumpulan Guthrie Berhad (GUTHRIE : stock-code 3131), Sime Darby Berhad (SIME : stock-code 4197) and Golden Hope Plantations Berhad (GHOPE : stock-code 1953), the contender IOI Corp Berhad (IOICORP : stock-code 1961)started its’ chess-move in order not to be out-done by the new giant by acquiring Pan Century Group, operator of an edible oils refinery, for RM423 million from one of India’s conglomerates, the Aditya Birla Group.

The almost 30-years old Pan Century Group acquisition would make IOI, Malaysia ’s most valuable plantation company, and the world’s biggest vegetable oil-based fatty acid producer in the world. Both Pan Century Edible Oils and Pan Century Oleochemicals posted RM20.02 million and RM15.52 million in net profit with revenue of RM1.57 billion and RM285.55 million respectively for financial year 2005.

Aditya Birla has been among India’s largest companies for over 50 years, chalking up revenues of about US$10 billion (RM35.5 billion) and has a market capitalization of about US$15 billion (RM53.3 billion).

Aditya Birla group executive president and business head Ravi Kastia said the Malaysian palm oil business has been sold at a PE (price to earnings ratio) valuation of 12. Other companies which were eying Birlas’ Malaysian palm oil business included SIME Darby, Kulim Malaysia BhD, among others.

With this latest move by IOI Corp, the other small players are waiting to be acquired while the middle-size plantation companies should start worrying about being eaten-up alive unless they start finding their own partner(s) from now onwards. As for investors, keep an eye on those small but well-managed companies as their current stock prices are very attractive. Who knows, Tan Sri Lee Shin Cheng might decide to flex his muscle again in the not so long future.

Some of the medium to small plantation companies and their market capitalization:
  • Batu Kawan Berhad – RM 3.2 billion
  • Asiatic Development Berhad – RM 3.0 billion
  • United Plantations Berhad – RM 1.8 billion
  • Kulim (M) Berhad – RM 1.47 billion
  • Tradewinds Plantation Berhad – RM 1.0 billion
  • Kwantas Corporation Berhad – RM 636 million
  • United Malacca Berhad – RM 621 million
  • Far East Holdings Berhad – RM 542 million
  • Sarawak Oil Palms Berhad – RM 370 million
  • Tanah Emas Corporation Berhad – RM 137 million

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