FELDA Global Ventures Holdings Bhd (FGV) is understood to be in talks with two companies — one linked to businessman Tan Sri Syed Mokhtar Albukhary and the the other China-based China National Cereals, Oils and Foodstuffs Corporation or Cofco — to take a strategic stake in the ailing plantation company.
Two separate sources The Edge spoke to confirmed that there have been talks with these two companies. They say the Syed Mokhtar
proposal has been gaining traction as the entry of a Chinese company into FGV could have political ramifications.
“I am sure a proposal by Syed Mokhtar is on the table,” says one source.
FGV CEO and president Datuk Zakaria Arshad created quite a stir on the sidelines of the Palm and Lauric Oils Price Outlook Conference & Exhibition recently when he brushed aside talk of Syed Mokhtar and the Tradewinds group being potential strategic long-term shareholders in FGV.
“No, not with that group,” Zakaria had said curtly when asked.
He said that the new strategic shareholder would be one that would complement FGV.
“What we want now are investors that are also in the business so they, too, will be looking for long-term growth. We want to grow together with them.”
When contacted by The Edge, Zakaria said, “I don’t want to comment on who the candidates are.”
In July last year, a news report said that Syed Mokhtar was in preliminary talks to buy into FGV, but this was denied by the company. However, talk of Syed Mokhtar looking to inject his plantation assets into FGV has been making the rounds since 2013 — barely a year after FGV’s listing and soon after the businessman privatised his plantation and property assets held under Tradewinds Corp Bhd, Tradewinds (M) Bhd and Tradewinds Plantation Bhd.
It is noteworthy that former FGV CEO and president Datuk Mohd Emir Mavani Abdullah is widely known to have joined one of Syed Mokhtar’s private outfits, and would be a good source of information for the businessman, having spent three years at the helm of FGV.
Syed Mokhtar’s main plantation business is parked under Tradewinds Plantation, one of Malaysia’s largest oil palm and rubber plantation companies with a total land bank of about 160,000ha, 87% of which has been planted.
FGV, meanwhile, has a total land bank of more than 450,000ha and is the world’s third-largest oil palm estate operator.
Like FGV and Felda, Tradewinds also has hotel operations and good land banks all over Kuala Lumpur.
Meanwhile, food industry giant Cofco is China’s largest food processor, manufacturer and trader. It is a leading supplier of agri-products and has an annual business volume of 150 million tonnes.
According to its website, Cofco is ranked first in terms of total assets and third in terms of revenue globally.
The group boasts a storage capability of 31 million tonnes, annual processing capability of 89.5 million tonnes, and an annual port transit capability of 54 million tonnes. Cosco has a presence in more than 140 countries and regions all over the world.
To put things in perspective, the group controls as many as 11 companies listed on the Hong Kong bourse.
However, the entry of Cofco into FGV may not be viewed positively. Already, there have been mutterings of discontent about the huge investments from China into Malaysia, in a short span of time.
“A Chinese party coming into FGV may not be good for the government. Settlers may not view it positively,” says one market watcher.
FGV’s largest shareholder is the Federal Land Development Authority (FELDA), which has 20% equity interest, while Felda Asset Holdings Co Sdn Bhd has a 13.66% stake and Koperasi Permodalan Felda Malaysia Bhd, 5.80%.
Felda’s land bank stretches over 54 constituencies in the Malay heartland, and the settlers have long been seen as a vote bank for the ruling Barisan Nasional. With a general election likely to be held this year or before August 2018 at the latest, the sale of a strategic stake in FGV to a Chinese party may not go down well.
FGV closed last Friday at RM1.91, giving it a market capitalisation of RM6.97 billion. FGV stock hit its highest level of RM4.82 on July 4, 2012, the year it listed. Since then, the share price has plunged owing to several factors.
Chief among them is FGV’s penchant for acquiring assets at hefty premiums. FGV went on an acquisition spree after its floatation exercise, forking out RM2.2 billion to buy the remaining 51% stake in Felda Holdings Bhd which it did not own from its substantial shareholder Koperasi Permodalan Felda Malaysia Bhd in October 2013. It bought 836.1ha of plantations in Sabah from Golden Land Bhd for RM655 million cash, acquired Sabah-based Pontian United Plantations Bhd for RM1.2 billion, and took over Asian Plantations Ltd, listed on the Alternative Investment Market of the London Stock Exchange, for RM628 million, among others.
After Zakaria took over the reins of FGV from Mohd Emir Mavani in April last year, he scrapped plans to buy 55% of China-based edible oil producer Zhong Ling Nutril-Oil Holdings Ltd for RM976.25 million and called off the proposal to buy 37% of PT Eagle High Plantations Tbk from Tan Sri Peter Sondakh for US$680 million, or RM2.89 billion then.
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