This article first appeared in The Edge Malaysia Weekly on May 21, 2018 - May 27, 2018
IS the 37% block of shares in PT Eagle High Plantations Tbk, acquired by the Federal Land Development Authority (FELDA) in late 2016 for a staggering US$505.4 million, still with the authority or has it been transferred to the Minister of Finance Inc (MoF Inc)?
There appears to be confusion over its present ownership, with sources offering different accounts.
A source familiar with the plantation giant, and employed by one of its units, says FELDA has already transferred the 37% stake to MoF Inc. “It has already been done. Why would FELDA want to hang on to such an asset?”
Another source, considerably higher up in the FELDA hierarchy, says there was a plan to transfer the shares but it has yet to take place.
“I think it is status quo for now. It was discussed at a high level but I don’t think it (the transfer to MoF Inc) has materialised,” he says.
Former FELDA chairman Tan Sri Shahrir Abdul Samad could not be reached for comment.
A handful of senior executives with FELDA and its 33.67% unit Felda Global Ventures Holdings Bhd (FGV) whom The Edge spoke to were aware of such a plan but did not know if it had been carried out.
What is clear, however, is that the transfer to MoF Inc was on the cards.
The acquisition, when it was announced, raised eyebrows as FELDA’s payment for Eagle High translated into IDR580 per share when the stock was trading at IDR298.
To make matters worse, Eagle High’s shares have now slipped to IDR189, giving the company a market capitalisation of US$421.62 million. As a consequence, FELDA’s stake is now only worth US$156 million, and it is sitting on a paper loss of US$349.4 million or RM1.39 billion.
The market had thought that FELDA was looking to transfer the block of shares to MoF Inc as Shahrir had told newsmen in August last year that FELDA was an intermediary for the Malaysian government in the acquisition of Eagle High.
“We are representing the government of Malaysia on two levels — the management and board of directors of Eagle High,” Shahrir told reporters after the launch of FELDA D’Saji’s 14th branch in Bangi, Selangor, last year.
Also, news reports had it that FELDA had secured government financing for the US$505.4 million purchase.
Although FELDA’s wholly-owned subsidiary FIC Properties Sdn Bhd reportedly obtained a generous discount of 25% which slashed the price down from the original price tag of US$680 million, the deal raised eyebrows as FIC’s mandate was specifically for the acquisition of non-plantation-related assets.
There were also questions as to why FELDA had acquired the block when its unit, FGV, had pulled out of the acquisition upon the advice of auditors KPMG.
KPMG had concluded a due diligence on Eagle High in 2015 and had cast doubt on the valuation of the Indonesian oil palm company, although to be fair, the price tag then was US$680 million.
The July 31, 2015, report — dubbed Project Sunshine — questioned Eagle High’s net assets, potential dividend leakages, financial performance, cash flow constraints and overstatement of land size.
It also suggested that FGV get legal advice to ascertain if certain schemes undertaken by Eagle High were in compliance with relevant laws and regulations in Indonesia.
To put things in perspective, Eagle High has suffered losses for the past three financial years. For the financial year ended Dec 31, 2017, it saw a net loss of US$13.9 million on revenue of US$227.6 million.
In pushing for the purchase, FELDA had argued that it was a good opportunity to acquire such a large asset. But its contention did not resonate with the market.
Eagle High has about 150,000ha of plantations spread across Indonesia, out of a total land bank of more than 320,000ha. As at 2017, the average age of most of its plantations was eight years.
The company is 37.64%-controlled by the Rajawali group, which, in turn, is controlled by Tan Sri Peter Sondakh, a close associate of former premier Datuk Seri Najib Razak.
MoF Inc was also not upfront about its acquisition of 51% equity interest in Mulia Property Development Sdn Bhd.
In March, MoF Inc belatedly announced that in July 2017, it had taken over the stake through its wholly-owned subsidiary, MKD Signature Sdn Bhd.
It is worth noting that MoF Inc only made the announcement after news of it broke.
Mulia Property — part of the Indonesian Mulia Group, controlled by businessman Eka Tjandranegara — is currently building the Exchange 106 tower at Tun Razak Exchange.
With an estimated gross development value of RM4 billion, Exchange 106 is slated for completion by the second half of the year.
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