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Merger creates world’s largest palm oil firm

29-11-2006 | |

Three Malaysian government-linked palm oil companies officially announced their intention to merge, creating the world’s biggest palm oil entity worth around 31.4 billion ringgit (US$8.66 million; €6.62 billion).

The merger, which the government hopes will cut costs and streamline the
industry, would also potentially create the world’s largest biofuels producer.
The palm oil sector in Malaysia is seeing a crude palm oil (CPO) price surge to
above RM1,900 per tonne (€397/t) – the highest level in more than 2½
years.

New company: Synergy Ddrive
In a complex deal
pushed forward by the administration of Prime Minister Abdullah Ahmad Badawi,
Golden Hope Plantations., Sime Darby and Kumpulan Guthrie will combine to form a
new company called Synergy Drive. Synergy Drive will acquire the assets of the
three companies – currently owned by government fund manager Permodalan
Nasional, or PNB – as well as assets of five of their six units, said CIMB
Investment Bank, acting on behalf of the new entity.

Boost in
crude palm oil production
The three companies have a total 525,872
hectares of land in Malaysia and Indonesia planted with oil palm, producing more
than 1.91 million metric tons of crude palm oil annually – equivalent to 13% of
Malaysia’s total output. CIMB said Synergy Drive could eventually account for as
much as 6% of global production with a potential annual revenue of 26 billion
ringgit (US$7.17 billion; €5.48 billion) and employ 107,000
people.

Malaysia is the
world’s top producer of palm oil, currently being developed as a top-tier
replacement for fossil fuels. In addition to reducing overlap between the
businesses, the government hopes the deal will push Malaysia’s palm oil
producers to develop its biofuels industry, which has attracted attention as
countries try to reduce their dependence on fossil fuels.

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