This article first appeared in The Edge Malaysia Weekly on June 12, 2017 - June 18, 2017

ON April 1 last year, Datuk Zakaria Arshad took the helm of Felda Global Ventures Holdings Bhd (FGV) from Datuk Emir Mavani Abdullah amid much fanfare.

After all, Zack, as he is popularly known, is the son of a FELDA settler and has been with the company for 32 years.

“Basically, he is one of them, the settlers,” the son of a settler, who is now a banker, tells The Edge, explaining Zakaria’s popularity.

Zakaria was hand-picked by FGV chairman Tan Sri Mohd Isa Abdul Samad to be the company’s CEO, and the two seemed to be happy working together.

However, sources from the plantation industry who know Zakaria say that after a couple of months, his relationship with Isa  took a turn for the worse.

“It soured. We knew he was having a tough time,” a friend of Zakaria’s says.

It seems the feud reached boiling point late last year when there was much pressure on Isa to step down from FELDA and FGV (FELDA has a 33% stake in FGV).

Some quarters say Zakaria did not back Isa, but opted to remain neutral, while others say he jumped out of what seemed like a sinking Isa ship.

However, in January, Isa was replaced as chairman of FELDA and its units but maintained his chairmanship at FGV.

It seems things have never been the same between the two, since then.

“Isa felt betrayed. He had brought Zakaria up from nowhere to be the CEO of FGV, a respected position. So, maybe he expected Zakaria’s support when he hit bad times at FELDA,” a mutual friend of the two tells The Edge.

Now Datuk Seri Idris Jala has been roped in. He was appointed by the prime minister last Wednesday as an independent party to find a way forward for FGV.

But will he be able to make a difference?

Spilling the beans

Last week, Zakaria, incensed that he had been told to take leave, came out lambasting FGV. He told a local daily that FGV Cambridge Nanosystems Ltd, a company producing high-grade carbon nanotubes and graphene, had lost RM117 million over the past three to four years, and now needed another £100 million for expansion.

Considering that only in late 2013 did Cambridge Nanosystems partner FGV, it would indicate losses of RM2.78 million a month or RM33.43 million a year from the company.

“To me, this is ridiculous. We’re a plantation company,” he is reported to have said.

Interestingly enough, in FGV’s FY2016 annual report, it is stated that on Dec 8 last year, the board approved the proposed divestment of the 70% equity interest in FGV Cambridge Nanosystems, and as at Dec 31, 2016, the company had been classified as an asset held for sale.

In FGV’s report for the first quarter ended March, there is only RM46.06 million worth of assets held for sale, which means FGV is unlikely to recover its investment in FGV Cambridge Nanosystems.

Zakaria told the daily that he had proposed to stop investing in the business and the board agreed. However, three weeks later, the decision was reversed when they decided to continue the investment.

Zakaria also said he had opposed a proposal to pay RM300 million for a 30% stake in a creamer factory, which the management also opposed, but the board overruled the decision.

“There are other examples, direct negotiations, direct contracts ... I’ve been entrusted with managing the company, but when I want to enforce strictly, this is what happens,” Zakaria had told the daily.

But he is coming out now with all this following his suspension, after more than a year at the helm.

It is also unclear how much of a role Isa plays in FGV as he is a non-executive chairman. As a matter of fact, other than Zakaria, all the board members are non-executive.

Zakaria had said there exists tangan-tangan ghaib or external hands in FGV.

While he did not elaborate, taking money out of the kitty of such a “political” company could be risky, unless done with the blessing of the powers that be. With FELDA settlers making up voters of as many as 54 constituencies, it would be political suicide to aggravate them in an election year.

Prime Minister Datuk Seri Najib Razak was expected to address FGV issues at an event in Kulai, Johor,last Saturday.

Political support

While some say Zakaria has the support of FELDA chairman Tan Sri Shahrir Samad in his feud with Isa, that is not the impression The Edge got when Shahrir was interviewed last April.

Nevertheless, it is understood that he met Najib last week to state his case, but the outcome is uncertain.

However, with some political blogs and websites firmly supporting Zakaria, he is not alone in this fight.

Isa, on the other hand, has been a long-time supporter of Najib and is known for his grassroots support base, which will come in handy in an election year.

Other than having been the menteri besar of Negeri Sembilan, Isa was the federal territories minister from 2004 to 2005, but has past issues with money politics when he went for the Umno vice-presidency. The Umno disciplinary board suspended his membership for three years, from June 24, 2005, to June 23, 2008.

In 2013, Isa stood for the Jempol parliamentary seat on a Barisan Nasional ticket in the general election and won.

In that election, BN won five parliamentary seats — Tampin, Jempol, Kuala Pilah, Rembau, and Jelebu — in Negeri Sembilan, in contrast to the opposition’s three seats — Seremban, Rasah and Teluk Kemang. BN also held on to power in Negeri Sembilan when it won 22 of the 36 state legislative assembly seats.

Some political pundits say Isa is very strong in Teluk Kemang and could recapture the seat for BN in the next polls.

FGV the biggest loser

While the wrangling between Isa and Zakaria goes on, the biggest loser at the end of the day is FGV.

Since early last month, FGV’s share price has shed 21%. The stock closed last Friday at RM1.66, giving the company a market capitalisation of just above RM6 billion.

At its peak, FGV hit an intra-day high of RM4.842 on July 6, 2012, just after its listing on June 28. Its market capitalisation stood at RM19.846 billion then, which means shareholders have seen more than RM13 billion wiped out from the value of the company.

But who is to blame for the many missteps at FGV (see story and chart on next page) since its initial public offering?

To Zakaria’s credit, he did come in and stop some large-scale acquisitions such as that of PT Eagle High. In June 2015, FGV had announced plans to buy a 30% stake in Eagle High for US$632 million cash and a further 7% stake via an issue of 95 million new FGV shares worth US$48 million, which gave the deal a total valuation of US$680 million or RM2.89 billion then.

FGV had been advised by its bankers, JP Morgan and Bank of America, to opt out of the deal as the price tag was too high for 37% of Eagle High.

Another deal FGV pulled out from under Zakaria’s watch was the proposed acquisition of a 55% stake in edible oil producer Zhong Ling Nutril-Oil Holdings Ltd for RM976.25 million.

However, some of these moves may have ruffled some feathers.

Nevertheless, while the wrangling seems likely to go on, FGV is suffering. For its first quarter ended March 31, 2017, the company posted a net profit of RM2.47 million on revenue of RM4.32 billion. This was an improvement from a net loss of RM81.077 million a year ago.

For FY2016, FGV posted a net profit of RM31.47 million on revenue of RM17.2 billion, compared with net profit and revenue of RM182.32 million and RM15.6 billion respectively a year earlier.

With the leadership in turmoil, how will FGV fare?

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