Malaysia's state-controlled Guthrie Group today withdrew an ambitious merger plan to create one of the world's biggest plantation companies after minority shareholders rejected the scheme on grounds of unfair valuation.

The Malaysian Investors' Association welcomed the move, saying this was the "first time in history that a government controlled company's merger plans were blocked by investors."

"We want a level playing field in investments and not peanuts to minority shareholders. We want to see a fair market value in mergers and takeovers of companies. There is a need for a level playing field for investors if Malaysia wants to have a world class financial exchange," it said in a statement.

Guthrie, which has plantation interests in Indonesia and is controlled by state investment arm Permodalan Nasional Bhd., had proposed to merge with its two units - Highlands and Lowlands Bhd. and Guthrie Ropel - to focus on its core activities, property and plantations.

But it decided to drop the scheme for now after Highland and Lowlands minority shareholders voted against it at a special meeting Wednesday, said Guthrie Group chief executive Abdul Wahab Maskan.

"The merger deal is off. We decided to withdraw the resolution (today) because the merger must be done in totality," he told reporters today after further special shareholder meetings.

Going back to drawing board

Abdul Wahab said the company would re-evaluate the proposal and "go back to the drawing board" to take into account the need to enhance shareholders' value.

Shareholders have expressed concerns over Guthrie Group's plantations operations in Indonesia and its gearing position but Wahab said the Indonesian arm was expected to outperform its Malaysian operations this year.

Earlier, the Malaysian Investment Association warned minority shareholders holding some 53 million units in Guthrie Ropel that they could lose RM78.17 million from the merger exercise as the company's shares were valued at RM3.40 a unit against the book value of 5.60.

Guthrie Group's shareholders could also not be expected to get good dividends in the near future as the group is saddled with total debt of RM2.8 billion as of last December, the Association said.