Prime Minister Abdullah Ahmad Badawi has insisted a merger of three plantation companies to form the world's largest palm oil firm will proceed despite delays in the deal.

Sime Darby, Golden Hope Plantations and Kumpulan Guthrie were due to sign a sale and purchase agreement on Monday but instead two of the firms said the deadline to conclude a deal was extended to Jan 29.

The New Straits Times on Tuesday reported the deal had hit a snag with the majority stakeholder of all three government-linked companies, Permodalan Nasional Bhd, getting cold feet.

"A decision was made. It will proceed," Abdullah was quoted as saying in the newspaper today.

The government has put its weight behind the proposal to merge the companies to create the world's largest plantation firm with a market capitalization of RM31.4 billion.

It has said it expects more corporate mergers and acquisitions in 2007 as it pursues a plan to attract foreign investors by creating a larger number of big local companies.