Felda in fresh arbitration for US$678mil sale of Eagle High stake back to Rajawali

Felda initiates fresh arbitration against Rajawali regarding Eagle High stake put option

Felda initiates fresh arbitration against Rajawali regarding Eagle High stake put option

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KUALA LUMPUR (Feb 23): Federal Land Authority (Felda) unit FIC Properties Sdn Bhd (FICP) has initiated fresh arbitration against the Rajawali Group regarding a put option to sell its 37% stake in PT Eagle High Plantations Tbk for US$678.09 million back to the Indonesian company.

The put option is part of the share sale agreement inked between FICP and Rajawali, when the former bought the 37% stake back in 2015, said minister in the prime minister’s department (law and institutional reform) Datuk Seri Azalina Othman Said.

The latest arbitration was initiated on Jan 17 at the Singapore International Arbitration Centre (SIAC). Rajawali disputed the put option as Felda’s unit exercised it.

Azalina said in a parliamentary written reply that FICP had made second attempt to exercise the put option on May 11 last year. Felda’s first attempt to exercise the put option was in May 2019.

According to her, either PT Rajawali Capital International or PT Rajawali Capital was supposed to pay FICP US$678.09 million on May 25, 2022 to buy back the stake.

It is noted that FICP bought the stake in 2015 for US$505.4 million (around RM2.2 billion). The put option entails a 6% interest per annum from May 11, 2017 to the date of full payment, according to a statement by Felda last year.

In the reply, Azalina said FICP issued its first put option notice on Jan 11, 2019, on grounds that RCI failed to meet the terms of the sale agreement, namely securing the Roundtable on Sustainable Palm Oil (RSPO) certification for Eagle High in the stipulated 30-month period.

“However, RCI and RC disputed the put option notice. RCI and RC initiated arbitration proceedings at the SIAC on Jan 30, 2019. Subsequently the results [of the arbitration] were in RCI’s favour,” Azalina said.

Felda had impaired RM1.58 billion or 71% of the investment, the Dewan Rakyat was told in 2019 during the tabling of Felda’s white paper.

Felda bought the 37% stake in Eagle High soon after its listed associate FGV Holdings Bhd called off a plan to acquire the same block of shares at a US$632 million price tag.

Critics at that time questioned Felda's acquisition, as the final price tag of US$505.4 million or 580 Indonesian rupiah per share was at a 95.86% premium to the market value of Eagle High then.

The counter, which is trading in the Indonesian stock exchange, last traded at 65 Indonesian rupiah — down 88.79%. It has seen net losses widening across its seven consecutive years of losses from 2015 to 2021.

Rajawali, which retains a majority stake in Eagle High, is controlled by tycoon Tan Sri Peter Sondakh, a known associate of Malaysia's former prime minister Datuk Seri Najib Razak.