In the third article of our monthly series on growth of large companies, we focus on IOI, which has evolved from a home-grown plantation player to be one of the world's largest integrated oil palm players.
PLANTATION giant IOI Corp Bhd has had an outstanding achievement as one of the world's largest integrated palm oil producers, with impressive growth in upstream and downstream operations, particularly over the past five years.
The group is reputed to be one of the best-managed and efficient palm oil producers, and IOI is also among the plantation stocks with the largest market capitalisation on Bursa Malaysia.
Starting from zero base, the IOI group's business empire was steadily steered by its executive chairman Tan Sri Lee Shin Cheng through a series of plantation expansion and strategic mergers and acquisitions (M&As) both in Malaysia and overseas.
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Tan Sri Lee Shin Cheng (right) and Datuk Lee Yeow Chor |
Lee, 67, started out as a field supervisor in the plantation industry. He is one of Malaysia's nine billionaires, who recently made it to the famous Forbes list.
This savvy planter is often seen by his plantation workers talking to oil palm trees in Tamil during his regular visits to the group's sprawling 144,055ha plantations nationwide. He also carries a walking stick to ward off snakes in the plantation site.
Industry observers believe that Lee's acquisition of 27,880ha from Dunlop Estates Bhd in 1990, which included 13 estates, two mills, two factories and a research station, were probably the IOI group's most strategic thrust into oil palm plantations.
Prior to the Dunlop Estate plantations acquisition, Lee was also busy acquiring other smaller pockets of plantations in Peninsular Malaysia and Sabah.
Historically, the beginnings of many present-day plantation companies in Malaysia were seen in the late 19th century and early 20th century. Among the companies, which could trace their roots back to the colonial era are Sime Darby Bhd (established in 1910) and Kumpulan Guthrie Bhd (1821).
Golden Hope Plantations Bhd had its beginnings as Harrisons & Crossfield Plc, which started as a tea and coffee trading company in 1844, and was managing agents for Britain-based domiciled plantation companies from the early 1900s until the transfer of ownership in 1982. Even Kuala Lumpur Kepong Bhd started as a Britain-based domiciled company in 1906.
It was only in 1970s that home-grown companies like IOI Corp, Asiatic Development Bhd, Austral Enterprises Bhd, Hap Seng Consolidated Bhd, PPB Oil Palm Bhd, Tradewinds (M) Bhd and IJM Plantations Sdn Bhd entered the plantation industry scene.
Between 1990 and 2000, it was obvious that the IOI group's focus was on the home front in land bank expansion for oil palm plantations and properties. At the same time, the group continues to dispose of its non-profitable and non-core units.
The group was one of the first township developers which successfully converted its plantation lands nearer to the city to create townships like its flagship Bandar Puteri in Puchong, Selangor.
It was in early 2000 when the IOI group started to prove its mettle as a serious downstream player by making strategic downstream investments in oleochemicals, and speciality oils and fats businesses.
In 2001, it acquired Palmco Holdings Bhd, which was later renamed as IOI Oleochemicals Bhd after a major corporate tussle with Sime Darby Bhd.
To further add value to the group's downstream operations, IOI Corp goes cross-border by acquiring a 100% stake in Loders Croklaan B.V. and its related businesses in the United States, Canada and Egypt from Unilever Group for a total cash consideration of 217mil euros or RM813mil in 2002.
The Loders Croklaan purchase has secured IOI Corp's position as a global integrated palm oil player with an immediate market access overseas.
Lee was quoted as saying: “These acquisitions (Palmco and Loders Croklaan) will enable IOI to evolve with the global market and provide the basis for continued growth to benefit our shareholders.”
He said the acquisitions had subtly but significantly provided the strategic edge for the group's plantation business as well as new applications, new geographical markets and value add for the group's palm oil-based products.
In March last year, the group made another bold decision to take IOI Oleochemical private and de-list it from Bursa Malaysia. It also acquired India-based Aditya Birla's edible oil and oleochemical units in Johor in September, which made IOI the world's largest oleochemicals group.
Given its hefty war chest of RM2.2bil, a market observer said, “it will not be surprising if the IOI group were to go for another round of M&As spree this year.”
“The ultimate question that comes to mind will be whether the group will finally succumb to the lure of investing in oil palm plantations in Indonesia similar to the earlier moves made by local plantation giants like Guthrie, KL Kepong and PPB Oil Palms.
Recently, Lee's son Datuk Lee Yeow Chor said the group planned to be a bigger player, starting with plantations. It plans takeovers in the South-East Asian region, preferably of established oil palm plantations.
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