This article first appeared in The Edge Financial Daily, on January 21, 2016.
KUALA LUMPUR: Felda Global Ventures Holdings Bhd (FGV) said it is still in talks over its targeted acquisition of PT Eagle High Plantations TBK from PT Rajawali Capital International, and expects to conclude the discussions by March.
“The latest update is that we are still looking for a new business model. Negotiations are still ongoing and hopefully they will be settled in another one or two months. They will definitely be concluded by March,” said FGV chairman Tan Sri Mohd Isa Abdul Samad yesterday.
He was speaking at a press conference held in conjunction with the signing of a memorandum of agreement (MoA) between the Federal Land Development Authority (Felda) and Encorp Bhd yesterday for the nomination of Encorp unit, Encorp Bukit Katil Sdn Bhd, as the master developer for a mixed township development in Bukit Katil, Melaka.
FGV on June 12 announced that it had entered into a heads of agreement to acquire a 37% stake in Eagle High, the third-largest plantation group listed in Jakarta for US$680 million (RM2.97 billion), whereby US$632 million will be settled in cash for a 30% stake, while the remaining 7% stake will be settled via an issuance of 95 million new FGV shares.
However, the proposed deal was met with criticism from its shareholders for being too expensive and was subsequently aborted, with FGV saying on Nov 30 that it was in discussions with Rajawali for “a possible different mode of investment” in Eagle High.
Meanwhile, Mohd Isa, who is also chairman of Felda and Encorp, said yesterday the 640.98-acre (259.4ha) Bukit Katil township will be launched in phases, with construction to commence in the first quarter of 2017 after receiving the necessary approvals. The development comprises residential and commercial projects, and public amenities.
“We expect to complete the development within 14 years. We announced a higher GDV (gross development value) of RM4.9 billion in 2015, but considering the dampened property segment, the GDV has been revised down to RM3.2 billion,” he said after the MoA was inked between the parties.
Mohd Isa said the project will be developed in three phases, with each phase to take about two to three years to complete. He said the timeline for the phases will depend on how the property market is doing.
“If the property market looks good, we might expedite development of the project. But for now, the market seems sluggish. We are flexible. We will adjust according to how the market does in the future,” he said.
He added that a minimum return on investment of 18% is expected from the project.
To recap, Felda acquired a majority stake in Encorp in 2014, using the latter as a property development vehicle to develop Felda’s large land bank.
According to Bloomberg, Felda has an indirect interest of 70.97% in Encorp, via its investment arm Felda Investment Corp Sdn Bhd.
FGV closed six sen or 3.8% lower at RM1.52, with a market capitalisation of RM5.76 billion. Encorp fell 2.5 sen or 0.3% to RM7.45, giving it a market capitalisation of RM214.3 million.