Three Malaysian state-controlled plantation companies are expected to merge as early as Thursday to form the world's biggest palm oil producer.
The move comes as earnings for the palm oil industry are expected to rise due to increased global demand for biofuels. Malaysia is the world's biggest producer of palm oil.
The plan to merge Sime Darby, Kumpulan Guthrie and Golden Hope was endorsed by the Malaysian government, said Najib Razak, the deputy prime minister. The three companies are controlled by PNB, the national investment fund.
The combined company would have a market capitalisation of more than US$7bn, making it the largest merger in Malaysia's history.
Mr Najib said PNB wanted "to rationalise the companies within the group. They believe the companies should be consolidated."
The three companies suspended trading of shares Thursday saying they planned to announce a "corporate exercise."
The merger could give the companies increased pricing power on palm oil for biofuels and complement Malaysia's state-owned Petronas, the oil and gas producer.
Sime Darby is the largest of the three companies, with a market capitalisation of M$15.2bn (US$4.2bn) followed by Golden Hope at M$7.4bn and Kumputan Guthrie at M$4.1bn.
CIMB, the state-owned investment bank, is the adviser on the merger.