28/11/06 (The Star)  -  PETALING JAYA: Most analysts are positive on the proposed merger of Sime Darby Bhd, Golden Hope Plantations Bhd (GHope) and Kumpulan Guthrie Bhd (Guthrie) to create the world's largest listed oil palm plantation player.

CIMB Investment Bank Bhd yesterday made the proposal, which would entail the setting up of a special purpose vehicle Synergy Drive Sdn Bhd.

Synergy Drive will make an offer to buy all the businesses of Sime Darby, Sime Engineering Services Bhd, Sime UEP Properties Bhd, GHope, Mentakab Rubber Co (M) Bhd, Guthrie, Guthrie Ropel Bhd and Highlands & Lowlands Bhd.

The RM31bil deal will be settled by the issuance of redeemable convertible preference shares that can be converted immediately into Synergy Drive shares valued at RM5.25 each or redeemed for cash. 

After the merger, Synergy Drive would seek a listing while the companies whose businesses were acquired would be delisted. 

An analyst at TA Securities said the pricing for GHope and Guthrie was “fair based only on the offer price” for each company, as they were a “slight premium” over consensus target price. 

“However, at this juncture, it is still unclear how the share price of Synergy Drive was derived. Investors need to know what they would end up with,” he said. 

Operation wise, the merged entity would provide synergy in the long term although it would be subject to how the management of the new entity would implement its strategies, the analyst said, noting that Sime Darby, GHope and Guthrie each had their own practices and procedures. 

An analyst with a local brokerage said exposure in Synergy Drive would not be a “pure plantation play” since the company would also have other businesses like motor vehicle, heavy equipment, property, energy and utilities.

“It depends on whether investors want exposure in the other sectors,” he said, adding that there could be leakages in a bigger entity. 

Another plantation analyst said the impact of the proposed merger on production of fresh fruit bunches was unlikely to be seen until the fourth quarter of 2008, given the anticipated streamlining process. 

Nonetheless, the enlarged entity would attract more investor interest since “funds would have no choice but to look at the biggest listed plantation entity in the world if they want to have an exposure in the sector,” he said.