Malaysian conglomerate Sime Darby has indicated it will expand processing operations through its takeover of New Britain Palm Oil, following its final purchase of Papua New Guinea’s largest agribusiness.

Sime Darby’s Franki Anthony Dass

Sime Darby Plantation (SDP), the plantation and agribusiness arm of Bursa Malaysia-listed Sime Darby Berhard, has completed its acquisition of New Britain Palm Oil Ltd (NBPOL) for US$1.74 billion (K4.23 billion) for 98.8 per cent of the company, which analysts agree was a ‘premium’ price.

NBPOL has delisted from the London Stock Exchange, and is considering its listing on the Port Moresby Stock Exchange.

The purchase of NBPOL adds another 135,000 hectares of land to SDP’s total land bank of almost one million hectares across Malaysia, Indonesia, Liberia and, now, PNG.

The takeover follows directly from Indonesia’s decision to cap foreign ownership of its plantations to 30 percent from its current 95 percent limit.

Integration

The Managing Director of SDP, Datuk Franki Anthony Dass, says over the next few months, SDP will focus on integrating the operations of both companies.

NBPOL will have five new board members, and a new Chairman, Dato’ Henry Sackville Barlow.

Dass said the takeover means that, by adding NBPOL’s production, it could be producing nearly 26% of the world’s Certified Sustainable Palm Oil output.

‘As a well-managed company with an experienced management team, NBPOL will immediately contribute to the bottom line of Sime Darby Plantation,’ he said in a statement.

‘Apart from the expansion of the upstream business in Papua New Guinea, NBPOL provides the opportunity for SDP to grow its downstream operations in Europe,’ he added.

Expansion

The Executive Director of the Institute of National Affairs, Paul Barker, notes SDP has paid ‘a significant premium’ above NBPOL’s market share price, indicating it wants to further develop the industry.

NBPOL’s palm oil fields.Credit: NBPOL

‘The agricultural sector needs capital investment,’ Barker told Business Advantage PNG.

‘If it takes overseas companies to maintain and develop existing plantations and maintain jobs, so long as they are reputable companies, and not like those involved in the SABLs, and are prepared to work in partnership with local landowners and shareholders, all well and good,’ he said.

Ratings

Ratings agency Moody’s says the takeover is unlikely to affect Sime Darby’s A3 rating and stable outlook.

‘The addition of NBPOL’s plantations will increase the scale and geographic diversity of Sime Darby’s sizable plantation segment, widening its competitive advantage in the upstream plantations segment against the rest of the industry,’ says Dylan Yeo, a Moody’s Associate Analyst.

Government participation?

PNG’s Prime Minister Peter O’Neill says his government is considering buying 30 per cent of NBPOL from SDP.

He said the public financing of agricultural products, such as palm oil, could follow the success of the nation’s investment in oil and gas assets.