Regulatory loophole, weak prices spur Indonesia palm oil takeovers

martes 3 de febrero de 2015 17:00 GYT

By Cindy Silviana and Eveline Danubrata

JAKARTA Feb 4 (Reuters) - Some Southeast Asian agri-companies are exploiting a regulatory loophole and turning to takeovers to expand their oil palm acreage in top exporter Indonesia just as weak demand for the edible oil makes smaller producers more open to deals.

Under a 2013 law, companies can only plant up to 100,000 hectares with oil palms, a limit put in place mainly to protect the smallholders that account for about 40 percent of Indonesia's palm oil output.

The restriction, however, exempts listed companies majority owned by the public, which makes some of the 11 palm oil firms listed on the Jakarta stock exchange potential takeover targets for others seeking to expand their land bank. Nine of these listed companies have a market value of less than $1 billion, according to Thomson Reuters data.

"The local regulations do indeed provide strong impetus for private owners to consolidate and list their plantation holdings on the Indonesian stock exchange or inject into a listed company," Le Sa Cheah, head of Indonesia equity capital market for Singapore's DBS Bank, told Reuters.

The slowing global economy has cut manufacturers' demand for palm oil, which is used in everything from soap to foodstuff, while weak crude oil prices and ample global supplies of alternative edible oils have dimmed its appeal.

Analysts say smaller Indonesian producers are now more willing to sell out as crude palm oil prices have fallen for three of the past four years, and prospects of a recovery are slim. That provides an opportunity for larger agri-conglomerates keen to invest in palm oil in the long term.

"Sellers are more reasonable in their pricing," said Ivy Ng, regional head of plantations at CIMB Investment Bank. "I think there are still a few strong buyers out there looking for acquisitions, so definitely there could be more."

Green Eagle Holdings, the palm oil business of local conglomerate Rajawali Group, was one of the first movers: late last year, it injected its plantation assets into PT BW Plantation Tbk. This backdoor listing allows Green Eagle to expand its oil palm acreage, under the 2013 law.   Continuación...