Felda moves a step closer towards FGV takeover

The state-owned palm oil plantation agency has proposed to acquire 13.88% stake for RM658m cash


THE Federal Land Development Authority (Felda) moves a step closer towards taking full control of FGV Holdings Bhd in the former’s bid to regain ownership of the land it leased to the company and raise income from its estates.

The state-owned palm oil plantation agency has proposed to acquire additional 506.19 million ordinary shares or a 13.88% stake in FGV for RM1.30 per share or RM658 million cash, according to a notice issued on behalf of Felda by Maybank Investment Bank Bhd yesterday.

The move comes nearly two months after Perspective Lane (M) Sdn Bhd — a holding company previously involved in the takeover of the Tradewinds Group and Padiberas Nasional Bhd — proposed to inject its plantation assets into FGV and become its largest shareholder.

The notice stated that Felda entered into a conditional share purchase agreement with the Retirement Fund Inc for the purchase of 222.48 million shares, which account for a 6.1% equity interest in FGV, for a cash consideration of RM289.2 million.

The land agency also entered into a separate conditional share purchase agreement with Urusharta Jamaah Sdn Bhd for the purchase of 283.71 million shares or a 7.78% equity interest in FGV for

RM368.8 million cash. The offer price represents a premium of 2.36% to 11.11% over the historical market price of FGV shares.

Felda currently holds about 775.03 million shares or a 21.24% equity interest in FGV, making it the single-largest shareholder in the company.

Upon the completion of the proposed acquisition, Felda, together with persons acting in concert (PACs) with the agency, will hold over 50% of FGV shares.

Felda’s increased stake in FGV will effectively trigger a proposed mandatory takeover offer (MTO) for all the remaining FGV shares not already owned by Felda and the PACs for a cash consideration of RM1.30 per share.

It was noted, however, that the proposals will not result in an MTO by Felda to acquire all the remaining voting shares in MSM Malaysia Holdings Bhd not held by FGV. MSM is the sugar refining armofFGV.

The proposed acquisition represents an opportunity for Felda to obtain statutory control of FGV in order to pursue its transformation plan, and to restructure Felda and its related companies to strengthen its business in the plantation sector.

The land agency has struggled to post any profit since FGV went public in 2012.

Hundreds of thousands of settlers, who took loans to invest in FGV, had then reaped benefits from the strong debut as its first day of trading ended at a premium of 20% over the issue price of RM4.55.

However, corruption allegations, poor management and weak crude palm oil prices have since caused its share price to slump.

The Employees Provident Fund, which was among the first key investors at FGV, ceased to be a shareholder in 2016.

Felda’s net income prior to FGV’s listing stood as high as RM1.1 billion, with revenue going up to RM5.9 billion from 2007 until 2011. Its debt ratio stood at 0.27 time, while its cash position ranged between RM1.8 billion and RM3.9 billion. Its income was primarily generated from land parcels it owned.

After the IPO, Felda recorded straight losses with its biggest amounting to RM4.9 billion from 2013 to 2017. Turnover ranged between RM200 million and RM700 million, while its debt ratio stood at 1.15 times. Felda has since had to rely on FGV’s fixed fee of RM248 million each year, plus 15% of operating profits from land plots FGV is leasing from Felda.

FGV had earlier requested for the suspension of trading of its securities with effect from 4.15pm yesterday, pending the release of a material announcement.

FGV’s shares last traded at RM1.27 per share, valuing the company at RM4.63 billion.