This article first appeared in The Edge Malaysia Weekly, on January 25 - 31, 2016.

PUBLIC-listed Felda Global Ventures Holdings Bhd (FGV) and its parent, the Federal Land Development Authority (Felda), are understood to be close to securing a 30% discount to the initial price tag of US$680 million for 37% in Indonesia’s PT Eagle High Plantations Tbk.

The ongoing negotiations with the Rajawali group — Eagle High’s parent — could be concluded within a few weeks and are geared towards Felda acquring most of the 37%, while FGV purchases “a minority stake”.

“Or at least that’s the picture being painted now. There have been a few delays and variations,” the source says.

With the 30% shaved off the original price tag, the price for the stake in Eagle High would be US$476 million, or RM2.05 billion at the current exchange rate.

The conclusion of the deal has been delayed a few times and the acquirer has also changed from FGV to its parent Felda. The acquisition has drawn unwanted attention and criticism of overvaluation of the plantation assets.

Some quarters reckon the plan to have FGV take up a minority stake means it would be easier for the public-listed entity to purchase the shares as shareholder approval might not be required below a certain value.

To recap, in June last year FGV signed a heads of agreement with Indonesian businessman Tan Sri Peter Sondakh’s Rajawali group to acquire 37% equity interest in Eagle High for US$680 million in a mix of cash and shares.

A final binding deal was to be announced in mid-August, but was delayed to end-October and later postponed to end-November. Last week, FGV chairman Tan Sri Mohd Isa Abdul Samad set a new deadline — March this year.

The initial deal was for FGV, via its wholly-owned unit Felda Global Ventures Kalimantan Sdn Bhd, to fork out US$592.5 million cash and issue 95 million new FGV shares to fund the acquisition.

In addition to Eagle High, FGV is buying 95% equity interest in Rajawali’s sugar business for US$67 million, or RM249 million cash.

When the deal was first announced, Eagle High was trading at a high of IDR450, but it has since fallen by more than 69% to IDR138.

It is understood that FGV was advised by its bankers, JP Morgan and Bank of America, to opt out of the deal as the price tag of US$680 million was too high.

With FGV hesitant to close the deal, Felda and its units are said to have sought to get involved in the acquisition. Felda’s main units, other than FGV, are Felda Investment Corp (FIC) and Felda Capital Cooperative or Koperasi Permodalan Felda.

Sources say FIC’s mandate is to buy into non-plantation assets, which could mean that the Eagle High acquisition is beyond its mandate, unless things have since been changed. 

FIC is also understood to have looked at Eagle High but opted out. Whether there has been a change of heart at FIC is not known.

As at end-December 2013, FIC had total assets of RM164.39 million and current liabilities of RM150.39 million, with no long-term debt commitments. According to RAM Credit Information, for the financial year ended December 2013, FIC had no revenue, but raked in RM13.45 million in after-tax profit.

FIC’s investments include 72.27% in developer Encorp Bhd and 25.31% in Iris Corp Bhd. At its close of 75.5 sen last Friday Encorp had a market capitalisation of RM214.3 million, while Iris, which ended trading at 19.5 sen, had a market capitalisation of RM387.9 million.

For its nine months ended Sept 30, 2015, FGV registered a net profit of RM15.74 million on the back of RM11.41 billion in revenue. As at end-September last year FGV had deposits, cash and bank balances of RM2.1 billion, while on the other side of the balance sheet it had long-term borrowings of RM2.61 billion and short-term debt commitments of RM428.15 million.

At its close of RM1.50 last Friday, FGV had a market capitalisation of RM5.4 billion.

Several things have changed since the negotiations for the sale of the stake in Eagle High commenced in June last year. On June 11,  the US dollar was almost 3.75 to the ringgit, but it has since strengthened almost 15.5% to 4.33.

Palm oil prices have also been volatile — according to the Malaysian Palm Oil Council (MPOC), the crude palm oil price has fluctuated from a high of RM2,534 per tonne to RM2,302 in January 2015. It is now at about RM2,522per tonne, according to the MPOC.

Eagle High is Indonesia’s third largest plantation company and is reported to have 419,006ha of plantations spread over Sulawesi, Kalimantan, Papua and Sumatra provinces and an average tree profile of below seven years old.

Well-connected Sondakh’s Rajawali group has has 65.5% equity interest in Eagle High.

Eagle High came about in September 2014, when Indonesian PT BW Plantation acquired Green Eagle Holdings Pte Ltd, which had a plantation landbank of 196,000ha in Indonesia, for IDR10.5 trillion (US$861 million then). A month before, BW Plantation had acquired nine plantation companies with a total landbank of 129,000ha from the Rajawali Group. The merged entity, Eagle High, currently has a total Indonesian landbank of 419,006ha, of which 147,000ha are planted.

Other than plantations, the Rajawali group is involved in mining, hotels and transport.

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