Felda gets better deal for Eagle High shares, says Shahrir

KUALA LUMPUR: Federal Land Development Authority (FELDA) newly-appointed Chairman Tan Sri Shahrir Abdul Samad has defended the agency's move to acquire a 37% stake in PT Eagle High Plantations Tbk (EHP).
"I agree with the acquisition. We'd got a better price than (that of) Felda Global Ventures Holdings Bhd (FGV) (which had earlier planned to buy the shares)," he said.
FGV, in June last year, announced plans to purchase a 30% interest in EHP for US$632 million in cash and a further seven per cent stake via an issue of 95 million new FGV shares worth US$48 million, which gave the deal a total valuation of US$680 million or RM2.89 billion then.
However, the talks fell through.
FELDA recently signed a deal with Rajawali Group to acquire the 37% for US$505.4 million (RM2.26 billion), which turned out to be 26% lesser than what FGV had planned to pay for EHP, one of Indonesia’s largest palm oil companies.
Despite the better price negotiated, there were criticism that FELDA was paying a hefty price for the stake in EHP.
"We all know (that) to get (such) a big block of shares in a company, you have to pay more than the market price as the valuation is not solely based on stock prices, but potential revenue that could come from the plantation company."
Shahrir asked if anyone could buy a 30% stake in plantation companies such as IOI Plantation, or KL Kepong for a small premium.
"If anybody can get that, instead of buying Eagle High Plantation, we will buy IOI or KLK. Is it possible for a 30% stake at a small premium?" he said in jest.
Last month, FELDA in a statement, explained that share price is not the accepted valuation method when it comes to a plantation company.
The share price may not reflect true value of EHP.
The accepted valuation is enterprise value per hectare which is US$16,000 enterprise value per hectare which is what FELDA paid for the 37 per cent stake.
This value compares favourably with recent transactions involving an Indonesian palm oil company, it asserted.
Shahrir believes EHP's results and dividend payout, which is expected within six months, would quash all the naysayers criticism.
He also said that the acquisition would not have any impact on FELDA's debt as it would be financed by the government.
"No. We are not going to borrow. It will be financed by the government. We are just being the platform," he said.
Asked why the acquisition of EHP was given so much importance by FELDA and FGV, he said it boiled down on the business joint venture concept at the ASEAN level and having a single voice in matters related to oil palm in the region.
This will give FELDA an advantage as Malaysia and Indonesia command between 85% and 90% of the global palm oil market.
Asked if FELDA is set go to an acquisition trail, he said FELDA's focus was on settlers and its assets.
"(We are) reorganising our assets and are looking back at the returns. If the returns are not reasonable, but the value (of assets) have increased, then we sell. We cannot be sentimental about the assets," he said.
On losses incurred by some of the subsidiaries, he believes FELDA management has the capabilities to perform or comply with the (agency's) governance.
"The ventures and losses were at the subsidiary level i.e. the broadband project and Sturgeon Fish Farming.
"I was surprised why FELDA has a broadband (project). If we were to form a pact with Telekom Malaysia, it would be cheaper," he said, adding that However, going forward, FELDA would be more stringent," he said. — Bernama