FGV defends Eagle High stake buy as cheaper than NBPOL, Unico Plantations acquisitions

FGV

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KUALA LUMPUR (June 19): Felda Global Ventures Holdings Bhd (FGV) has defended its proposed acquisition of a non-controlling stake in Indonesia’s PT Eagle High Plantations Tbk, saying it is cheaper than the acquisitions made for New Britain Oil Palm Ltd (NBPOL) by Sime Darby Bhd and Unico-Desa Plantations Bhd by IOI Corp Bhd.

In a statement today, FGV said the proposed implied equity value per hectare (EV/ha) for the planted hectarage of controlling shareholder Rajawali Corp is approximately US$17,400 per ha — lower than the recent transactions involving NBPOL (EV/ha of US$25,900) and Unico Plantations (EV/ha of US$23,500).

“In comparing with recent Indonesian transactions, hectarages involved are small in nature, of less than 70,000 hectares,” the group hit back in response to news reports highlighting criticisms from a Malaysian lawmaker and the Employees Provident Fund (EPF).

The plantation group has since drawn flak following its proposal last Friday to buy a 37% stake in Eagle High from Rajawali Corp for about US$680 million (RM2.55 billion).

The purchase consideration will be settled by US$632 million cash plus the issue of 95 million new FGV (fundamental: 1.15; valuation: 2) shares.

According to the statement, FGV said, from a corporate perspective, this deal presents the group with a “great opportunity” as part of its expansion plan.

“As per FGV’s investment policy, all deals are subject to a thorough due diligence process as well as deliberation and approval by the board,” it said.

The group reiterated the proposed investment would enable it to become a “world leading integrated palm oil plantation company” by way of increasing land bank, improved age profile of crops, cost optimisation and strategic long-term partnership, with a notable conglomerate in Indonesia.

It added the partnership would also provide access to Asean’s largest single market while allowing the group to gain a foothold in a key palm oil supply market.

In a statement Monday, Member of Parliament for Petaling Jaya Utara Tony Pua urged FGV to call off the proposed deal, “to prevent even further losses to investors which include the Federal Land Development Authority, settlers, the EPF, Lembaga Tabung Haji and various state governments”.

The EPF has also urged FGV to explain why the group is paying a hefty premium, with its chief executive officer Datuk Shahril Ridza Ridzuan questioning the structure of the deal.

FGV shares ended the day up 7 sen or 4.2% to RM1.75 today, giving it market capitalisation of RM6.09 billion.

(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.)