FELDA buying 37% stake in Indonesia's Eagle High for RM2.26 billion

PETALING JAYA: Federal Land Development Authority (FELDA) is acquiring a 37% stake in Indonesia’s PT Eagle High Plantations Tbk for US$505.4 million (RM2.26 billion), 25.7% lower than the US$680 million (RM3.04 billion) offered to Felda Global Ventures Holdings Bhd (FGV) earlier.

At the same time, FGV also made a filing with Bursa Malaysia that its wholly-owned subsidiary FGV Kalimantan Sdn Bhd had on December 23 entered into a termination agreement with vendors PT Rajawali Capital International and PT Rajawali Corpora to terminate all transaction documents.

Recall that FGV had in December 2015 announced the abortion of its acquisition plan, citing market conditions and developments in the palm oil sector. However, FGV had then said it was seeking a possible different mode of investment in Eagle High.

FELDA said in a statement that its subsidiary FIC Properties Sdn Bhd had signed a sale and purchase agreement (SPA) with Rajawali Group to acquire a 37% stake in Jakarta-listed Eagle High, one of Indonesia's largest palm oil companies.

FELDA will then among others have access to more than 320,000 ha land bank in Indonesia, which is about 4.4 times the size of Singapore, including more than 125,000 ha of planted nucleus.

“Further details on the acquisition could not be provided at this moment as the SPA is subject to approval of the relevant authorities, both in Malaysia and Indonesia,” it noted.

FELDA explained that its decision to acquire the stake is in line with its long-term goal to become among the world’s largest palm oil groups.

"We have to continue to show growth as staying stagnant will mean that FELDA will be left behind as our competitors are expanding fast in this growing industry. To get this growth, FELDA needs to venture into new frontiers as additional plantation land in Malaysia is becoming scarce," it added.

Apart from gaining access to more land bank, the acquisition will also help FELDA and its associate companies to make further inroads into the lucrative and expanding domestic market in Indonesia.

“We believe that the acquisition will bring positive development for the industry and the country. The investment in a major palm oil player in Indonesia will act as an impetus and further cement stronger bilateral ties between Malaysia and Indonesia to move forward the agenda of the recently established Council of Palm Oil Producing Countries (CPOPC) of which both are founding members,” it said.