M&A deals to gain momentum

KUALA LUMPUR: The plantation sector will likely see more privatisation or merger and acquisition (M&A) deals moving into 2026, analysts say.

Maybank Investment Bank (Maybank IB) Research noted that M&A activities in the industry have gained momentum this year.

In a report to clients yesterday, the research outfit highlighted that such transactions, fuelled by sustained high crude palm oil (CPO) prices, strong balance sheets, and limited greenfield expansion opportunities, have reached approximately RM2.06bil year-to-date, almost doubling the RM1.08bil seen in 2024.

Furthermore, it expects the momentum to continue into next year, supported by “monetisation of prime estates by companies such as SD Guthrie Bhd, Genting Plantations Bhd and Kuala Lumpur Kepong Bhd.”

Among the key deals this year highlighted by Maybank IB was the privatisation and delisting of FGV Holdings Bhd, which could cost its parent Federal Land Development Authority up to RM600mil, following the earlier privatisation of Boustead Plantations by Lembaga Tabung Angkatan Tentera for RM1.1bil in 2023.

The research house also observed that property-related transactions made up about 45% of the total M&A value this year, led by SD Guthrie’s sale of 484 ha of land in Negri Sembilan’s Malaysia Vision Valley 2.0 for RM573mil, which will be developed as an industrial park under a joint venture led by Eco World Development Group Bhd.

It added that the transaction price – at RM1.6mil per ha – is 33 times higher than the average physical transacted price of estate land between 2023 and 2025.

Aside from strong CPO prices, Maybank IB believes the M&A push is also underpinned by several factors, such as the lack of new greenfield opportunities due to strict no deforestation, no peat and no exploitation (NDPE) commitments, the need to unlock hidden land value, and the cost and labour pressures weighing on smaller planters.

The research house also highlights a striking valuation gap between the transacted prices of plantation estates – averaging RM49,100 per ha – and the market’s implied enterprise value per ha of several listed planters.

“Selected small and mid-cap planters trade at 37% to 49% discounts to the average transacted physical prices,” it said, noting that among these companies, Sarawak Oil Palms Bhd, Hap Seng Plantations Holdings Bhd, and Chin Teck Plantations Bhd stand out as “prime privatisation candidates.”

Meanwhile, head of dealing at Moomoo Malaysia Ken Low told StarBiz that the trade agreements signed this week between Prime Minister Datuk Seri Anwar Ibrahim and US President Donald Trump, which includes tariff reductions potentially to 0% on key plantation exports like palm oil and rubber, could lead to heightened M&A interest in export-oriented operators with established supply chains to the US market.

The trade agreements are also likely to bolster valuations in the sector.

Having said that, he stressed that this could reduce the incentive for widespread privatisations among small and mid-cap planters in the short term.

He said instead, the improved export outlook could drive more strategic mergers or partnerships to leverage enhanced US market access, particularly for undervalued entities with strong sustainability credentials that can attract foreign investment without delisting.

“Larger groups, buoyed by the deal’s reciprocal benefits and potential for increased cash flows from exports, may prioritise land monetisation through ventures like converting portions of estates into industrial parks, renewable energy sites, or mixed developments, especially as the agreement ties into

broader tech and liquefied natural gas purchases that encourage diversification,” he said.

This shift, Low pointed out, aligns with post-summit emphases on economic resilience, where monetising non-core assets could fund upgrades in automation and compliance, rather than pursuing privatisations that might limit public market funding options.

On the flipside, he emphasised that while the trade deals between Putrajaya and Washington may see the M&A buzz going through to 2026 as companies consolidate to meet heightened demand, sustainability could dip significantly beyond next year if ageing estates are not addressed through accelerated replanting, supported by government incentives, amid ongoing labour shortages that require mechanisation investments to offset reliance on foreign workers.

He said: “Tighter NDPE compliance, now amplified by the trade deals’ emphasis on sustainable trade practices to align with US standards, will add scrutiny but could foster longer-term deals via joint ventures focused on traceability and innovation, such as biomass-to-energy projects.”

Overall, Low said the agreement’s positive trade dynamics provide a buffer against these headwinds, but sustained momentum still hinges on sector-wide reforms, with selective high-quality M&A persisting as players adapt to a more integrated Asean-US economic landscape.

From a pure valuation perspective, chief investment officer at Tradeview Capital Nixon Wong believes both the privatisation and M&A trends can coexist, likely involving net-cash rich undervalued players such as Sarawak Oil Palms and Hap Seng Plantations, the latter being 69.5% owned by Hap Seng Consolidated Bhd which makes privatisation entirely feasible.

Also expecting the consolidation trend to persist into next year, he said strong balance sheets of planters after years of high CPO prices and lack of greenfield expansion opportunities mean it would be beneficial for buyers to consolidate the market.

Contextually, heightened CPO prices contribute to healthier balance sheets for plantation companies as elevated prices generate stronger operating cash flow, with costs rising more slowly than selling prices.

Another analyst with a foreign research firm said cross-border acquisitions continue to remain plausible, but will likely be selective and strategic rather than large-scale.

She said foreign ownership sensitivities and Malaysia’s land laws with state-level approval requirements mean most deals would occur through joint ventures or partial stakes, not outright takeovers.

“Singapore-based groups or regional private equity investors seeking environmental, social and governance-compliant brownfield exposure may emerge as the most active cross-border participants,” she said.