Views of analysts on consolidation of plantation companies


  • Business
  • Monday, 24 Mar 2003

SOME analysts have reservations over any speedy completion of the mergers among PNB-linked plantation companies.  

“I believe we (analysts) are not the only ones still fuzzy over any intended mergers but also those plantation companies themselves,” said Mayban Securities plantation analyst Kenny Mak. 

“However, should the mergers be right on track, I believe the entire exercise is likely to stretch to another two to three years, almost similar to the previous mergers of banking groups,” he said. 

Mak pointed out: “Cross-company restructuring, especially with the current share prices of most plantation companies trading below net tangible assets (NTA), makes it even more difficult to carry out disposal transactions or conduct good valuations.” 

At the same time, he believes that minority shareholders of some affected plantation companies may not even agree to such a merger exercise. 

Mak said some of these potentially affected companies were still busy undertaking “internal” mergers to restructure their plantation operations. 

Kumpulan Guthrie, for example, is in the midst of merging its two plantation-based subsidiaries Guthrie Ropel and Highlands & Lowlands. I&P has proposed to merge with its 57.9% subsidiary Austral Enterprise, which will result in the latter being delisted from the KLSE. 

Another plantation analyst questioned the prospect of merging all the plantation companies under Sime Darby which he sees “is not even a pure oil palm industry player.”  

Moreover, he said, consolidating some companies that might not be very well managed was not likely to improve the situation. 

He pointed out that minority shareholders might not even want to accept the merger at prices below the NTA. 

According to this analyst, a good solution is for Sime Darby to buy out the minority shareholders' stakes in these affected plantation companies. 

That would be similar to the case of Boustead Holdings Bhd, which is willing to pay RM6 per share to delist its plantation subsidiary Kuala Sidim Bhd.  

“But then the next question would be whether Sime Darby has enough funds for such an exercise?” added the analyst.  

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