KUALA LUMPUR: Felda Global Ventures Holdings Bhd (FGV) is selling its Canadian oilseed crushing and refining plant to Viterra Inc, a wholly-owned subsidiary of global mining giant Glencore plc, for C$190 million (RM608.2 million) cash.

In a filing with Bursa Malaysia yesterday, FGV said it had entered into a sale and purchase agreement with Viterra to dispose of its entire stake in Twin Rivers Technologies Entreprises de Transformation de Graines Oléagineuses du Québec Inc (TRT-ETGO).

TRT-ETGO operates an oilseed crushing facility and a food-grade oil refinery in Bécancour, Quebéc, Canada.

The disposal is expected to raise gross proceeds of RM596.7 million, which FGV plans to utilise for repayment of borrowings (RM300 million), working capital (RM269 million), and expenses of the disposal (RM27.7 million).

FGV (fundamental: 1.15; valuation: 2.0) said the disposal provides an avenue for it to divest its non-profitable subsidiary as part of its transformation plan, and the disposal consideration also represents a price-to-book ratio of about 1.26 times.

Based on FGV’s balance sheet as at June 30, the group’s total borrowings amounted to RM4.55 billion, while its cash pile stood at RM2.26 billion.

The group added that TRT-ETGO had recorded weak financial performances in the last three financial years.

“By divesting this unit, we are streamlining our downstream focus, and hence strengthening the group’s competitive position,” FGV group president and chief executive officer Datuk Mohd Emir Mavani Abdullah (pic) said in a statement yesterday.

“At FGV, we are ready to take hard calls when it comes to delivering high total shareholder returns. We trust that this divestment will improve the group’s profitability position,” he added.

Barring any unforeseen circumstances, the group expects the deal to be completed in the fourth quarter of 2015.

The plantation group’s share price has tumbled 44% from RM2.13 at the beginning of this year to RM1.20 yesterday, with a market capitalisation of RM4.34 billion.

The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to www.theedgemarkets.com for more details on a company’s financial dashboard.

This article first appeared in digitaledge Daily, on August 28, 2015.