This article first appeared in The Edge Financial Daily on April 11, 2019

KUALA LUMPUR: The Federal Land Development Authority (Felda) will continue to pursue its efforts to exercise the put option to sell back the 37% equity stake in Eagle High Plantations Tbk (EHP) to the vendor PT Rajawali Capital International, which is owned by Indonesian businessman Tan Sri Peter Sondakh.

“Oh yes [we will pursue the put option],” said Minister of Economic Affairs Datuk Seri Mohamed Azmin Ali when asked about the put option for Felda to sell its shares in EHP.

“Felda’s board of directors has decided not to allow any further extension to Rajawali ... which is why [Rajawali] decided to file the arbitration,” he said during a press conference outside the Dewan Rakyat yesterday.

“We will go through [the arbitration] process. The stand and decision of the Felda board of directors remains the same, as they [Rajawali] have already received an automatic six-month extension last year,” he added.

Felda, said Mohamed Azmin, filed a notice to Eagle High last year to exercise the put option to sell back its 37% stake in EHP to Rajawali.

However, the request, according to him, was rejected.

“This is proof that they do not have the financial capability to pay Felda’s cost of investment in EHP.

“This proves that Datuk Seri Najib [Razak]’s assumption that the put option exercise will allow Felda to recoup its investment is not true,” he said, referring to the argument by the former prime minister that the put option is proof that Felda’s investment in EPH will generate returns.

Mohamed Azmin highlighted that in 2014, Rajawali’s net capital asset was only US$7.2 million, raising the question on how Rajawali would have the financial muscle to buy back the EHP stake at US$505.4 million?

“In early 2019, Felda sent a notice to EHP to exercise the put option. What happened? They opposed. They brought it to court. Now that the court has allowed Felda’s request. Rajawali took the step to file an arbitration [against Felda],” said Mohamed Azmin.

To recap, Felda had in April 2017 completed the purchase of a 37% stake in Eagle High from Rajawali for US$505.4 million (US$0.043 or 584 Indonesian rupiah per share), which was higher than the valuation by two independent appraisers on the company of US$264 million and US$404 million respectively.