Malaysia’s Felda and Indonesia’s Rajawali likely to ink stake agreement soon

An investment unit of the Federal Land Development Authority (Felda) may sign an agreement for the acquisition of a significant stake in Indonesian planter Eagle High Plantations Tbk.(Reported by thestar.com.my)

According to sources, representatives from the Rajawali Group and Felda may be meeting in Jakarta next week for a signing ceremony to conclude the deal, which has been over a year in the making and has undergone several iterations.

The deal is said to be similar to the one proposed by Felda Global Ventures Holdings Bhd (FGV) more than a year ago, although the value of the transaction is likely to be adjusted, taking into account the differences in the currency exchange rate over that one-year period.

FGV had proposed in June last year to acquire the 37% stake in Eagle High from Rajawali Group, a diversified Indonesian conglomerate controlled by billionaire Tan Sri Peter Sondakh, for US$631mil in cash and US$47mil in new FGV shares.

The currency exchange rate at that time valued the deal at RM2.5bil. However, the ringgit had weakened 7.6% against the US dollar from a year ago. FGV had also proposed to acquire Rajawali’s sugar business in Indonesia for US$67mil. Felda has a direct 33.7% stake in FGV, while Koperasi Permodalan Felda Malaysia Bhd owns 5.8% equity interest in the plantation company. Felda has another commercial unit, Felda Investment Corp Sdn Bhd, which was set up in 2013 to undertake non-plantation-related projects. It is worth noting that over the past one year, FGV had ceased to make big-name acquisitions in a bid to conserve cash and focus on existing assets domestically.

In April, the group scrapped the proposed acquisition of a 55% stake in Chinese edible oils firm Zhong Ling Nutril-Oil Holdings Ltd for RM976.25mil. Despite an acquisition spree over the past three years to enlarge its landbank, the group’s earnings did not improve due to the slump in crude palm oil prices, as well as stagnant production figures. The change in strategy is spearheaded by FGV’s current chief executive officer Datuk Zakaria Arshad (pic), who is the third CEO to take the reins of the group in the four years of it being listed. FGV’s shares have rallied steeply over the past month in anticipation of an announcement relating to Eagle High.

The conclusion of the deal would mean that FGV does not have to participate in the investment, which under the previous terms would see it having to fork out hundreds of millions of ringgit in cash. In contrast, Eagle High’s share price had remained subdued recently, having hovered above 200 rupiah since February. It was last traded at 206 rupiah per share yesterday. (Thestar.com.my)