KUALA LUMPUR (June 17): Employees Provident Fund (EPF) urges Felda Global Ventures Holdings Bhd (FGV) to explain why the plantation group is paying a hefty premium for proposed purchase of a non-controlling stake in Indonesia’s PT Eagle High Plantations Tbk.
EPF’s chief executive officer Datuk Shahril Ridza Ridzuan said “a lot more issues”, including the structure of the deal, were raised in FGV’s annual general meeting (AGM) yesterday.
“I think one of the things we (EPF) expressed are the concerns on valuation and in relation to the structure of the deal.
“But we are waiting for them (FGV) to formally notify the shareholders of the actual transaction when it comes to voting. I am pretty sure we raised a lot more than this issue. (We) hope to get more clarification on this issue,” Shahril said.
Shahril was speaking to the media after sitting as a panelist in a Bursa Malaysia-organised discussion on value proposition for environment, sustainability and governance investment.
He is commenting on FGV’s proposal to buy a 37% stake in PT Eagle High from controlling shareholder Rajawali Corp for about US$680 million (RM2.55 billion).
The purchase consideration would be settled by US$632 million cash plus issue of 95 million new FGV shares.
The proposal has sent FGV share price to a record low of RM1.65 on Monday. The stock closed at RM1.68 today.
In addition, FGV (valuation: 2; fundamental: 1.15) proposes to also buy an equity interest of between 93.3% and 95% in Rajawali’s sugar project for US$67 million (RM251.3 million).
When asked if EPF would review its 5% shareholding in FGV, particularly at a time when the share price has been performing poorly, he instead replied that the provident fund has pulled out of several companies in the past.
“The most notable one was Malaysia Airlines System Bhd (MAS). Once we felt that their business model is not sustainable, we exited and sold out the shares in the company, and many other companies in the past.
“Most of the time it is not feasible because we tend to be a small shareholder. We take the view that the company (MAS) is not sustainable anymore,” he said.
Shahril pointed out that EPF has already reduced its stake in FGV to 5% from about 10% at its peak following the listing exercise in 2012.
The Edge Financial Daily today reported that an EPF representative raised questions on the rationale behind the RM2.55 billion acquisition, particularly the generous premium that was accorded to the deal, at FGV’s AGM yesterday.
The EPF representative told FGV shareholders and the management at the shareholder meeting that the premium of 70% to market prices was a pricey deal as opposed to a 30% premium which was acceptable, according to The Edge Financial Daily.
“We have expressed our concerns or issues which hopefully they (FGV) would address when the time comes for the actual vote,” said Shahril
“We note that it (acquisition) is still subject to due diligence and a shareholders vote in the future, so there was no vote taken on the issue yesterday. Our representative would have taken the opportunity to express their views on the reported facts released so far. So we will wait and see,” he added.
(Note: 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.)