Felda Global needs NBPOL the most

PETALING JAYA: It will be a very close fight among plantation giants Wilmar International Ltd, Sime Darby Bhd and Felda Global Ventures Holdings Bhd (FGV) in their bid to acquire a 49% stake in New Britain Palm Oil Ltd (NBPOL) worth RM3bil, according to industry experts.

Plantation industry expert M. R. Chandran said depending on what they brought to the table, all three companies could go into creating value for the local population in Papua New Guinea (PNG) where NBPOL was based.

“They can say they are prepared to set up downstream activities in PNG which are export-oriented, creating foreign exchange earnings for the country,” he told StarBiz.

The three companies are out of four which have been short-listed from seven potential bidders for the stake held by Kulim (M) Bhd, a subsidiary of Johor Corp.

StarBiz had reported that seven parties, including Indonesian companies Sinar Mas group and RGE Group, as well as Kuala Lumpur Kepong Bhd (KLK) and IOI Corp Bhd had expressed interest following a competitive bidding exercise.

However, it was reported that KLK and IOI Corp did not submit their bids, while the fourth successful company short-listed remained a mystery.

NBPOL has 77,000ha of oil palm plantations in PNG and the Solomon Islands, 12 palm oil mills and one refinery each in PNG and Liverpool.

The group is also the largest sugar and beef producer in PNG with over 7,700ha of sugar cane plantations and 9,200ha of grazing pastures, as well as a seed production and palm breeding facility

Chandran noted that Wilmar was a leading trader in palm oil with downstream operations across the globe, while Sime had strong cash reserves and extensive upstream and downstream operations.

He added that in Malaysia, FGV and Sime’s strong track record coupled with the fact that most funds in Malaysia were cash rich meant that there would be no problem securing financing for the deal.

“I’m sure Wilmar and Sime would be willing to pay a premium for the stake. The question is, can Felda afford to pay the premium?” he asked.

Out of the three companies, Chandran hoped FGV would secure the deal as it stood to gain the most, as it did not have a strong downstream foothold in the UK and Europe.

Pointing out that FGV’s downstream presence there would be significantly boosted, he said that as a large revenue earner, it could expand the refinery in Liverpool and eventually become a major player in Europe.

He noted that the highly-competitive refinery, which had state-of-the-art operations, also produced palm derivatives which commanded higher margins.

“Having a strong downstream presence in the UK will not only enhance FGV’s image but also spur it to enhance its sustainability-based operations in order to be a global player.

“If it acquires NBPOL, then the pressure will be on it to retain that image,” he said, adding that RSPO (Roundtable on Sustainable Palm Oil) certification was an absolute necessity to market palm products in the Western world.

For Wilmar and Sime, he opined that winning the stake in NBPOL would not make a very big impact on their operations.

Chandran said a major point in FGV’s favour which would appeal to the shareholders and PNG government was that it could endeavour to introduce its know-how in setting up cooperatives to develop the rural countryside.

“This will also be a feather in the PNG government’s cap to have FGV investing in its blue chip company,” he said,

Meanwhile, he said FGV would no longer be viewed just as a government agency but a strong corporate player which would attract foreign investors.

CIMB Investment Bank Bhd analyst Ivy Ng said all three companies stood to gain as a plantation asset of this size and quality was hard to come by, adding that none of them had such an asset in PNG.

She said FGV would benefit in terms of downstream exposure to European customers, while the sugar business would be new for Sime.

“How will the winner of the stake use this asset to add value to its business? That’s what I’m interested in,” she said.

In terms of advantage, she said Wilmar already had a working relationship with NBPOL, while Felda would probably bank on its settler programme which took care of its shareholders.

She said Sime was the biggest of the three in terms of market capitalisation and had a UK heritage as well as Australian connections.

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