06/06/2011 (The Star) - Kretam Holdings Bhd, a Sabah-based plantation company, said the risks associated with it moving into the production of refined palm oil products is mitigated as there are only two other refineries in Sandakan that would be in competition for the supply of crude palm oil.

In a Bursa Malaysia filing, the company said it was looking to buy three companies for a total of RM513.5mil to expand its oil palm cultivation business as well as venture further downstream through the operation of a palm oil refinery.

Kretam will buy Abedon Sdn Bhd, which is involved in the cultivation of oil palm and sale of fresh fruit bunches, for RM419.5mil.

It will also acquire biodiesel manufacturer and processor Green Edible Oil Sdn Bhd for RM92mil.

Both deals are to be satisfied with the issuance of new Kretam shares and irredeemable convertible preference shares (ICPS) to the sellers.

The new Kretam shares and the ICPS will amount to some 221 million with an issue price of RM2.30 a piece.

Green Edible has recently completed the construction of a factory to produce refined palm oil products such as palm olein and palm stearin. The commercial production and sale should commence by the third quarter.

The new facility will be able to produce up to 400 tonnes of refined palm oil products per day. Its refined palm oil products are intended for export.

“The board believes that the acquisition of Green Edible is synergistic to Kretam's existing oil palm cultivation activities.

“It will also provide an alternative source of income to the group and contribute positively to our earnings in the long term,” it said.

The company said it hoped to increase the production capacity of refined palm oil products from 400 tonnes to 1,500 tonnes per day.

Kretam will also buy Palm Products International Alliance Sdn Bhd, which is involved in the marketing of palm oil products, for RM2.

The sellers of these three companies are Kretam's chief executive officer Datuk Lim Nyuk Sang and his associates.