Guthrie 'manages' plantation firms

Guthrie 'manages' plantation firms

KUALA LUMPUR (Dow Jones): The top official at Malaysian
plantation concern Kumpulan Guthrie Bhd. confirms that
Indonesia's government is reviewing the company's acquisition of
oil palm estates in that country, but insists it won't hurt the
takeover.

Guthrie's Group Chief Executive Abdul Khalid Ibrahim said the
company had already assumed management control of the Indonesian
plantation companies on March 31, and is now working with the
seller on a due diligence exercise.

"Yes, we've been told (of the review). It's a review of
process, how the thing (the sale) has been conducted. That's all.
It's just like an audit," Khalid told Dow Jones Newswires, in his
first remarks on the matter since Guthrie closed the deal last
month with the Indonesian Bank Restructuring Agency, or IBRA.

Conflicting statements from Indonesian government officials
after that have cast doubts over the status of the deal, which
gives Guthrie control over around 200,000 hectares of oil palm
estates in Indonesia.

Guthrie paid $368 million for the 25 oil palm plantation
concerns formerly owned by the Salim Group. IBRA took over the
companies from Salim Group after the financial crisis that struck
the region in late 1997, hitting Indonesia particularly hard.

Other Malaysian plantation companies view the Guthrie
acquisition as a test case and are closely watching to see how
the deal pans out amid growing political uncertainty in
Indonesia.

Analysts say looking at Indonesia is the right strategy for
Guthrie, as plantation land becomes more scarce in Malaysia, and
is also a way to cut palm oil production costs. However, others
believe the deal may yet be scuppered even at this stage - and
that has weighed on Guthrie's stock price.

Indonesia's Vice President Megawati Sukarnoputri reportedly
said recently the deal wasn't final and wanted it to be reviewed.

Finance Minister Prijadi Praptosuhardjo later said the deal
was final, but that Indonesia wanted Guthrie's commitment on
community development to assist the people living around the
plantation areas.

Guthrie CEO Khalid said the review was being done to satisfy
Indonesia that the sale process was done properly. "It is good
for Indonesia and it's good for Guthrie...The review doesn't mean
anything to the arrangement (the sale)," he added.

"In fact starting from March 31, the whole program is already
in the hands of Guthrie," Khalid added.

Khalid is confident Guthrie won't lose the oil palm estates,
even if there are changes in Indonesia's political leadership.

"No, it will not happen. I don't think Guthrie will lose if it
(the review) is conducted in a proper manner." And if the
Indonesian government goes back on its word on the deal, it will
have to compensate Guthrie, Khalid noted.

Guthrie succeeded in its bid to buy the Indonesian plantation
companies late last year and signed the preliminary agreement in
November with IBRA.

But the deal became mired in controversy due to opposition
from some Indonesian legislators and plantation companies who
worried that Guthrie would become a major player in Indonesia's
crude palm oil (CPO) industry.

Indonesia is the second-largest producer of CPO in the world,
after Malaysia.

Opposition to the deal also centered on land ownership rules.

In Guthrie's case, the Indonesian government's failure to set
down clear guidelines for investment added to the lack of clarity
over the issue.

The Indonesian government currently sets a limit of 20,000
hectares in one province and 100,000 hectares countrywide, for a
single plantation company. Although IBRA signed an agreement to
sell the plantations to Guthrie, the 25 plantations under the
deal far exceed the limit.

According to sources at IBRA, unidentified local businessman
have objected to Guthrie's purchase of the plantations from
Salim, saying they already own the land. Such confusion in a
country where legal land ownership is hard to prove is a major
headache for deals of this magnitude.

Khalid said the deal was signed in good faith, and IBRA had
cleared the details with the Indonesian government before
agreeing to the sale.

Khalid said Guthrie will work with PT Holdiko Perkasa - the
IBRA-controlled seller of the plantations - for six months on a
due diligence exercise.

He said Guthrie wanted all the assets accounted for properly.
That includes getting back $50 million in cash collateral pledged
by PT Indofood Sukses Makmur, which owned stakes in the
plantation companies, to an Indonesian bank.