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Friday, November 24, 2006

Not All Mergers are Made in Heaven

In the spirit of Malaysia Boleh there is now a plan to merge three large plantation GLCs i.e. Golden Hope, Sime Darby and Guthrie into a mega company.

These three companies are steeped in history and played a major role in the development of Malaysia. I worked in one of them for about 11 years; seven of which were in an associate company in Batu Caves.

Even today plantation crops make an important contribution to the economy.

It seems that PNB is forcing all the companies together as it is the major shareholder and it would be interesting to see how the minority stockowners will be treated or will they simply be brushed aside with all kinds of exemptions provided by the SC?

Before you break out the champagne bottle, such a mega company may be less profitable than 3 separate companies as there will be no more competition among the senior managers and perhaps the end result will be yields moving towards the lower end of the 3 groups.

There will also be loss of perhaps 25% of senior Malaysian managers posts and these people will find it tough to adjust to life outside the plantations.

It would be interesting to see all the relevant documents to justify this plan and what is going to be offered to minority shareholders.

I imagine that the merged company will be a convenient way to provide cheap shares to some special crony under the NEP equity giveaway.

One thing is sure. The bank handling this exercise will make a nice bundle.

graphics: http://www.ma-strasbourg.justice.fr/images/balance.gif

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