New Britain Palm Oil has taken a big leap to meeting a target for expanding its plantations by buying control of Papua New Guinea palm oil group CTP from Cargill for $175m.

Shares in the London-listed group ended at a 19-month high.

New Britain, which also unveiled record palm oil production for 2009, said the "very exciting" purchase of 80% of CTP would allow it to exploit greater economies of scale, particularly in logistics, by adding about 25,000 hectares to its plantation portfolio. 

The purchase of the stake from a Cargill subsidiary would also get New Britain nearer doubling its plantation area by 2015, a target set by the company at its stockmarket flotation in 2007, when it had 40,000 hectares of planted land.

"This single acquisition will increase the company's established plantation area by almost 50%," the company said.

'Production potential' 

The group added that it would, through replanting and improving fertilizer applications, be able to improve "materially" the productivity of the CTP plantations, whose output of palm products fell by 2.6% to 156,700 last year.

"The group does not consider the historical trends and production volumes of the plantations… to be indicative of their production potential," New Britain said.

"The plantations are not operating at the levels achieved by New Britain at its current plantations."

The company added that the deal, which will leave the state as a 20% owner of CTP, had been backed by its biggest shareholder, Kulim.

However, it would mean the sacrifice of the final dividend for 2009, usually paid in May, to save funds to pay for the transaction.

Shares rise