Friday May 27, 2005 - UNITED International Enterprises Ltd (UIE), aDenmark-based company controlled by United Plantations Bhd’s Tan Sri B.Bek-Nielsen, and Swedish group Melker Schorling AB have proposed to mergetheir specialty vegetable oils and fats manufacturing operations.

Described as "a true merger of equals," the proposed merger of AarhusUnited A/S and Karlshamns AB will result in the creation of one of theworld’s largest and leading market players in speciality fats for theconfectionery and food industries.

Currently, UIE holds about 46% stake in Aarhus while Melker controls about31% stake in Karlshamns. Aarhus and Karlshamns are leading producers ofhigh value-added specialty vegetable oils and fats in Denmark and Swedenrespectively.

In 2004, the combined entity’s pro forma net sales were 9.7 billionSwedish kroners or 7.9bil Danish kroners.

An industry source told StarBiz yesterday that Malaysian plantation groupUnited Plantations, which is 20% owned by UIE, would indirectly benefitfrom the merged entity through the potential increase in exports of itspalm oil-based products to Europe.

The source said United Plantations was well prepared, as it had recentlyerected a new plant capable of providing alternatives to the hydrogenatedproducts to cater to the current legislation changes in Denmark and theUnited States.

Last year, United Plantations produced 177,670 tonnes of crude palm oiland 48,140 tonnes of palm kernel.

"The proposed merger is a true merger of equals," the source said.

The source said the strategic rationale for combining the companies "haslong been evident", as it offered long-term prospects for capitalising ona stronger platform, thus improving market positioning vis-a-viscompetitors.

Among others, the merged entity could now optimise production in NorthernEurope, expand into North America through Aarhus' platform in New Jerseyin the area of speciality fats, and strong food service business inBritain where both Aarhus and Karlshamns have attractive market positions.

A plantation analyst with a local brokerage said that UIE’s latestcorporate exercise came as a complete surprise as the group had indicatedin October last year that it was looking at disposing of its 46% stake inAarhus. Aarhus, in turn, has a 23% stake in United Plantations.

There had even speculation that several plantation giants such as GoldenHope Plantations Bhd, the Kuok group and the Wilmar group of Indonesiawere potential buyers of UIE's stake in Aarhus.

In fact, as early as August last year, the UIE board had decided to reviewits relationship with Aarhus and consider whether UIE should maintain itsshareholding in the company.

The analyst said: "The combined synergies will clearly have a positiveinfluence on United Plantations - arguably one of the most cost-efficientoil palm plantations in the world - in the long run.”"

Shares in United Plantations on Bursa Malaysia yesterday closed unchangedat RM5 with 112,300 units traded.