PT SMART to merge with Inti Gerakmaju

JAKARTA (JP): Shareholders of the publicly listed palm oil plantation firm, PT Sinar Mas Agro Resources and Technology Corporation (SMART), approved on Friday the company's plan to merge with its subsidiary PT Inti Gerakmaju (IGM), an operator of hybrid coconut and rubber estates.

SMART senior general manager Tan Siauw Liang said IGM would be merged into SMART to improve the latter's performance.

Tan said SMART owned 49 percent of IGM shares, while the other 51 percent was owned by IGM's founder, Arthur Tahija.

Under the merger process, Arthur's stake in IGM, worth Rp 30 billion (US$3.15 million) would be swapped for shares in SMART of equal value.

Although the shareholders agreed with the merger plan, the company had yet to obtain the approval of one of its main creditors, state-owned bank BNI 46.

SMART, however, fell short of saying how much it owed BNI 46.

SMART said that the creditor's approval was only a matter of formality, and the company expressed confidence of obtaining its approval next year.

Tan further said his company had experienced difficulties this year due to the sharp drop in crude palm oil (CPO) prices.

CPO prices, he said, dropped from US$450 a ton to $190 this year.

"The drop in CPO prices was triggered by the availability of substitute products, such as soybean oil, which have flooded the world market this year," Tan was quoted as saying by the Antara news agency.

Soybeans were largely produced in South American countries, he explained.

Further pushing CPO prices down was the oversupply of CPO products from Indonesia and Malaysia, he added.

Indonesia, he said, produced 7.2 million tons of CPO this year, while Malaysia produced 11 million tons.

However, he estimated that CPO prices could rebound to $250 a ton on an expected decline in soybean oil production.

Tan said that production could drop because of unfavorable soybean oil prices, which were estimated to fell to $280 from $400 a ton. The plunge in soybean prices would hurt soybean companies, as soybean oil production costs were $380 a ton.

SMART, which is a member of the Sinar Mas Group, has an annual production capacity of 300,000 tons of cooking oil and 75,000 tons of margarine.

The Sinar Mas Group is in negotiation with the Indonesian Bank Restructuring Agency (IBRA) to submit assets as part of the restructuring of the group's loans worth over $1 billion.

The group received the loans from Bank Internasional Indonesia (BII), another member of Sinar Mas. (bkm)