FGV sues ex-CEO, ex-directors over APL acquisition

This article first appeared in The Edge Malaysia Weekly, on November 26, 2018 - December 02, 2018.
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FGV Holdings Bhd is suing its former group president and CEO, Datuk Mohd Emir Mavani Abdullah, and 13 others for RM514 million and other damages in relation to the acquisition of Asian Plantations Ltd (APL) in 2014.

The others named in the suit include Tan Sri Isa Samad (who was FGV chairman at the time of the acquisition), former chief financial officer Ahmad Tifli Mohd Talha, former business development of downstream cluster vice-president Farisan Mokhtar and former downstream cluster senior general manager Rasydan Alias Mohamed.

The nine others being sued are former non-executive directors of FGV, namely Tan Sri Ismee Ismail, Tan Sri Wan Abdul Aziz Wan Abdullah, Tan Sri Sulaiman Mahbob, Datuk Omar Salim, Datuk Noor Ehsanuddin Mohd Harun Narrashid, Datuk Yahaya Abd Jabar, Datuk Faizoull Ahmad, Datuk Nozirah Bahari and Datuk Fazlur Rahman Ebrahim. Note that they were all board members of the company when it announced the intended acquisition of APL at end-August 2014.

“The company brought this action for loss suffered from their (the directors’) failure to discharge their respective fiduciary duty, duty of fidelity and/or duty to exercise reasonable care, skill and diligence,” FGV says in a filing with Bursa Malaysia.

It adds that the lawsuit concerns the group’s acquisition of 100% equity interest in APL via a voluntary conditional cash offer in 2014.

FGV is claiming RM514 million for loss arising from the acquisition, or alternatively, damages or loss from the acquisition as assessed by the court.

Recall that in December last year, The Edge reported that FGV was investigating the acquisition, which had raised several red flags and was seen as overpriced.

Among others, a due diligence by Deloitte on the then proposed acquisition did not support the intended deal. The due diligence report was not presented to the then FGV board, whose members also did not press for a due diligence process before agreeing to the purchase.

Another critical issue was that as much as 40% of APL’s land bank could not be planted on — about 7,300ha were unplanted while another 2,600ha were caught up in Native Customary Rights (NCR) claims.

Overall, APL had 24,622ha of oil palm plantations across Miri and Bintulu in Sarawak.

Interestingly, APL had seemingly close links to Sarawak-based politicians.

Among its major shareholders when FGV took control was Keresa Plantations Sdn Bhd, with a 24.9% stake. Keresa Plantations is the vehicle of Tan Sri Leonard Linggi Jugah, son of hallowed Sarawakian leader Tun Jugah Barieng, who was the first Iban minister in the Cabinet.

Also worth mentioning is that at the point of FGV’s takeover, APL’s board was chaired by Tan Sri Leo Moggie who, at one time, was member of parliament for Kanowit, Sarawak, as well as minister of water, energy and telecommunications.

Other claims in the FGV lawsuit announced last Friday include general damages with a 5% interest rate per annum between today and the final settlement date; costs with a 5% interest rate per annum between the date of costs awarded and the final settlement date; and other reliefs deemed fit by the court.

FGV says it will announce the financial impact from this litigation at a later date. “However, there is no impact on existing operations,” it adds.

APL was listed on the London Stock Exchange’s Alternative Investment Market. In late August 2014, FGV made a conditional cash offer of £2.20 per share or £120 million (about RM628 million at the time).

The offer price represented a 5.4% premium to APL’s weighted average share price in the month prior to the announcement, and was a 294.7% premium to its net asset per share of 55.74 pence at Dec 31, 2013.

The acquisition was satisfied with funds from FGV’s RM10.4 billion initial public offering in 2012.

 

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