Drive for Synergies -- MY WAY!

MY can stand for Malaysia or Pak Lah or NegaraKu, depending on the outcome come 2020.
An egg hatches in 2006 may become a pretty chick of a gooseling in 2007 and enabled to grow the next decade or so before anyone can ink the Report Card whether it is Da Golden Goose.

By then many Bloggers would have surrendered through fatigue at the rate so many are taking hi-atus:( instead of Hi-Tea:) now and then, the Now more often than Then. Desi's already planning a two-week break whether he gets a year-end Bonus or knot as he values his life more than the "almighty" ringgit. Okay, in caps -- RINGgit.


All the newspapers today frontpaged the biggest merger-of-the-century, IMHO-lah; here comes the story from The NST's Business Section. Desi has picked this UMNO-controlled paper's version since the business deal involves mostly GLCs, which translate into mainly UMNO interests, though some parties would like to deny it at all costs. I don't think any non-UMNO members careth a damn whatever directions the new vehicle takes. It's promoted as a drive for synergies, but WHOSE WAY, and WHO GAINS?



Desi can only ask questions, and economic minds must put the massive, intricate chains involved to arrive at the "big picture", but my gut feelins tell Desi I don't have any share in IT.

Maybe those ER who feel they have a "small" share in this moving vehicle, please enlighten us with your story. Petronas may not share its goodies with the commoners, PLUS too is raiusing its tolls to bring thee a New Year Gift with a lighter pocket, and the newest babe-in-gestation in NegaraKu SYNERGY DRIVE SDN BHD promises a newer driver on the Malaysian horizon.

Yes, the Prime Minister Datuk Seri Abdullah Ahmad Badawi is welcoming again big ticket projects onto the Malaysian plates. Mayhaps VISION 2020 can be achieved in 14 years time after all, "small house" dweller Klang ADUN Datuk Zakaria, "One-eye closed" MP for Jasin Mohd Said, and all the AP holders, et al notwithstanding. Or sitting down collecting rentals, as usual.
Oh, by the way, the submarine cables project linking Sarawak and Peninisular Malaysia to absorb the excess power to be generated by THE BAKUN DAM is being revived, costing RM9billion! -- so much for reducing Big Ticket items as pledged by the PM when scrapping the Bridge To Nowhere cyber-linking Johor with Singapore -- less than one year ago?

Maybe the four-eyed meeting between the two PMs did spring some Epiphany.
Desi is gonna be on yes, HIATUS of 14-years-winkiewinks, and will resemble a nu'e Rip van Winklewhen he wakes up from his Reverie 14 years later, God-willing, still in one peace.



November 28 2006


Synergy Drive proposes RM31.4b plantation deal
By Adeline Paul Raj


The boards of target companies have 30 days
to deliberate on the proposal and the deal
is expected to be completed by the fourth quarter of 2007



SYNERGY Drive Sdn Bhd yesterday put a RM31.4 billion offer on the table to merge Sime Darby Bhd, Kumpulan Guthrie Bhd and Golden Hope Plantations Bhd and create the world's largest publicly traded oil palm company.

Synergy Drive is a special vehicle created and seed-funded by CIMB Investment Bank solely to undertake the merger. It will buy the assets and liabilities of the three companies, as well as five of their six subsidiaries.


They are Sime Engineering Services Bhd, Sime UEP Properties Bhd, Mentakab Rubber Co (Malaya) Bhd, Guthrie Ropel Bhd and Highlands & Lowlands Bhd. Only Negara Properties Bhd will be left out of the merger.

Permodalan Nasional Bhd (PNB) and the Employees Provident Fund (EPF) are the common major shareholders in the eight companies.

Synergy Drive made simultaneous offers to the board of directors of the target companies yesterday, giving the respective boards 30 days to deliberate on them. The deal is expected to be completed by the fourth quarter of 2007.


"This is a CIMB proposal to enable the merger of these complementary entitites to create value from scale and synergies," said CIMB Group chief executive officer (CEO) Datuk Nazir Razak.

He said the merger would create a global leader in oil palm plantations, with a potential total annual revenue of over RM26 billion, a combined workforce of over 107,000 and total plantation land of about 600,000ha located in Malaysia and Indonesia.


The merged entity would account for about 6 per cent of global palm oil production and would have a combined net profit of RM1.4 billion.


Nazir believes the proposal is value accretive to all shareholders as they can choose to participate in the new company or exit with cash in hand, at a 5 per cent premium over the suspended market price of the respective securities yesterday.


The companies are expected to resume trading tomorrow.


Assuming that all shareholders accept the share offer, then PNB and its funds would emerge as the biggest shareholder in Synergy Drive with over 45 per cent stake. EPF would own over 10 per cent and the rest would be held by minority shareholders.


The merger deal is conditional upon PNB accepting the share offer.


Post-merger, Synergy Drive will seek a listing on the main board of Bursa Malaysia, where it is expected to be fifth largest listed company with its RM31.4 billion market cap.

All the other companies under Synergy Drive will be delisted. Nazir expects that Synergy Drive would be renamed and rebranded later.


"The heart of this integration is in plantations and property," he told reporters at a press conference yesterday.


Negara Properties, a subsidiary of Golden Hope, is left out of the merger as the company is not seen as "a priority in terms of the integration and synergy creation exercise", Nazir said. The exercise will, however, trigger a mandatory general offer for Negara.


With all the eight companies' businesses lumped into Synergy Drive, it would be up to its management later to decide what to do with the non-plantation assets," Nazir said.


Based on current estimates, just under 40 per cent of the merged entity would comprise plantation assets.


He pointed out, for instance, that a 1 per cent drop in the merged entity's cost would translate into a 10 per cent rise in pre-tax profit.


The merger proposal was drawn up by CIMB and not the Government.


"We spotted an opportunity, have been bold enough to table the proposal and enable the merger to happen," he said, adding that the offer would be presented to PNB.


Synergy Drive's management, would be determined by the board, which in turn would be determined by its major shareholders later, he said.


"People must not in any way think that Synergy Drive is anything but a SPV created to enable this exercise," he said, on rumours in the market as to who was behind Synergy Drive. He said the SPV is currently held by two trustees from CIMB for charitable purposes.

DESIDERATA: Please note the significance of the LAST PARAGRAPH. I guess the rumors are what prompted the following~~

Yang Berhormat Saudara Lim Kit Siang, also Opposition Leader, has an interesting entry floated to his blog yesterday by one Imran. I'm reprising it here to be read in conjunction with two earlier reports which I'll try to C&P later, K! for (y)our esteemed rumination -- so put on your thinking cap. ENJOY!



~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~


from blog.limkitsiang.com~~
Whose Synergy Drive?
Time & Date: November 27, 2006 @ 02: 29.48
Categories: Economics General

"Imran has sent me the following email on news reports about the proposed creation of the world’s largest plantation company through the merger of three of the country’s largest plantation companies – Sime Darby Bhd, Golden Hope Plantations Bhd and Kumpulan Guthrie Bhd – which, in a larger merger along with six other public listed companies, either owned by these three companies or involved in plantations, would likely create the country’s fourth biggest company on Bursa Malaysia:


"I’m a Malaysian studying overseas. I follow the Malaysian news scene
very carefully as it is the only way of knowing what is going on.
However, recently I found some discrepancies which have now been
detected and shown on international channels like EuroNews and BBC (UK).
This is regarding the proposed merger of the three plantation companies,
Sime Darby, Guthrie and Golden Hope.

On Thursday, Deputy Prime Minister Datuk Seri Najib Tun Razak commented that

“*This is PNB’s initiative*. I believe they want to rationalise the
companies within the group and they have decided plantation companies
should be consolidated into one roof. This is one of the processes
towards that. “*We support the move decided by the trustees of PNB, of
which I am one of the members*. This is the position that we (the
Government) have taken,”

Conclusion: It’s PNB’s directive and it has been decided by the trustees.

However, a PNB statement:

*PERMODALAN Nasional Bhd (PNB) has yet to see a proposal to merge three
of its plantations companies, its chief executive officer Tan Sri Hamad
Kama Piah Che Othman said.

Synergy Drive is “not our company”, Hamad Kama Piah said.

Conclusion:* PNB knows nothing about it.

*

*
These discrepancies are having negative effects as in the international
channels it is seen as a non-transparent business move that will push
Malaysia further behind in foreign investment."


The two news reports referred to by Imran are:

(i) “Govt Supports PNB’s Merger Of Sime Darby, K. Guthrie & Golden Hope ” (Bernama);
(ii) “CEO: Plantation group merger must create value for PNB” (Business Times)

UPDATEd @2.34PM:

An initial analysis in The Star provides some insights ~~



Improving palm oil sector puts merger on fast track

By HANIM ADNAN

PETALING JAYA: The three-year-old plan to merge Sime Darby Bhd, Golden Hope Plantations Bhd (GHope) and Kumpulan Guthrie Bhd (Guthrie) under the stable of Permodalan Nasional Bhd (PNB) has finally been set into motion.

The original plan was for Sime Darby, the group with the strongest track record among the three, to be the vehicle to spearhead the merger to create a world-class palm oil plantation conglomerate with a strong global presence.

However, the plan was shelved when crude palm oil (CPO) prices declined and uncertainty plagued the global supply and demand for the commodity at that time.

But it is a different story for 2006 as the plantation sector is seeing the CPO price surge to above RM1,900 per tonne – the highest level in more than 2½ years. This is also supported by significant changes in the demand structure for palm oil, which is now sought after not just for food, but also for palm biodiesel.

The improved outlook has spurred optimism that there will be more upside for both upstream and downstream activities in the palm oil sector.

Industry observers and plantation players concur that the encouraging developments in the palm oil sector going forward have somewhat helped put the proposed merger on the fast track.

However, the interesting but unexpected twist this time around is that the proposed merger would be driven by a special purpose vehicle, Synergy Drive Sdn Bhd, which will be seed-funded by prominent financial group CIMB Investment Bank Bhd (CIMB) to create the world’s largest listed oil palm plantation conglomerate.

StarBiz has been made to understand that the targeted PNB companies under the merger plan would be holding urgent board meetings this week to discuss CIMB’s proposal. All three companies would have to decide by the Dec 27 deadline.

GHope is believed to be planning to hold its board meeting on Thursday.

Timing had also been an important factor for the proposed plantation merger, especially with the CPO price now at a high and the market capitalisation of most plantation companies having gone up tremendously.

Beneath the pretty picture, however, are underlying risks associated with the formation of the plantation conglomerate with a substantial land bank of about 600,000ha in Malaysia and Indonesia.

In the plantation sector, having a large acreage is not a reflection of a company’s efficiency and competitiveness.

An industry consultant said Sime Darby, GHope and Guthrie’s CPO and palm kernel yield per hectare were well below the average CPO yield of five tonnes per hectare or more achieved by top plantation players like IOI Corp Bhd, Kuala Lumpur Kepong Bhd and United Plantations Bhd.

Over the past three years, the return on equity of the three companies had been in the single digit unlike their peers’ double-digit returns.

Furthermore, controlling a land bank of 600,000ha is definitely no easy feat. It would perhaps be more logical for Synergy Drive to focus purely on CPO production and downstream activities like refining, oleochemicals and biodiesel and list its other core businesses under separate units.

Golden Hope Plantations group chief executive Datuk Sabri Ahmad told StarBiz: “With globalisation, size is important to compete with giants like Cargill Bunge and ADM.”

“Our recent exercise with AEB estates proves that benefiting through synergy and cost reduction is possible with CPO prices heading towards RM2,000 per tonne,” he added.

The future for the palm oil industry is bright going forward, Sabri said. At the end of the day, it is all about “creating value and generating better return”, to quote PNB group chief executive Tan Sri Hamad Kama Piah Che Othman.

DESIDERATA: The highights (BOLDED THUS or italicised) are done by tis hoRst, and are worth some rumination; but this Synergy roadmap may yet take some twists yet when the globalised world of commodities experience His and Los (pronounced Highs and Lows, you dumbelles:(, then behold some unexpected tsunamis. It's a mite early to talk Merry Christmas, or Eat, Drink and Be Merry at PNB's Hq. Meanw'ile, you can party with a socialist like Desi,or a socialite like Helen, at da tehtarik stall, anyone? Should you get Lost in the Furong Maze, just throw up five (Batu) Seremban stones. One should hit Anak M or teh-C!:):)

But after January 1, 2007 I may have to register with the Welfare Department because there will be another round of increases when the highway tolls go up. Now go and salute the semi-valued miniser in charge. You voted for damned, didn't you, in March 2004?