Felda fails in bid to take FGV private

KUALA LUMPUR (March 16): The Federal Land Development Authority (Felda) has failed in its bid to take FGV Holdings Bhd private at RM1.30 per share.

This begs the question of what Felda's alternative plan is since it could not wholly own the plantation group.

Felda only obtained 81% equity interest in the plantation group as the offer closed at 5pm on Monday, according to a filing with Bursa Malaysia.

Felda was required to obtain 90% of the shares it did not own from the acceptance of its takeover offer in order to trigger a compulsory share acquisition and to take the listed company private.

This means that the authority will need to have acceptance from shareholders who collectively hold 1.626 billion FGV shares and that will translate into a 95% shareholding, or approximately 3.46 billion shares in the plantation giant.

In the filing, FGV said that Felda, together with the persons acting in concert, held 2.955 billion shares representing a 80.99% stake in FGV as at 5pm today. Felda also received 455,800 shares or 0.1% from shareholders who accepted the takeover offer.

Felda's takeover offer values FGV at RM4.74 billion or RM1.30 per share — a 71.43% discount to its 2012 initial public offering price of RM4.55 per share.

The offer, which was first announced on Dec 7, 2020 and turned unconditional on Dec 23, saw its deadline postponed three times from the original Feb 2 to March 15.

Felda's attempt to take over FGV came at the heels of plans by Felda to terminate its land lease agreement (LLA) with the latter. Under the LLA, FGV leases 350,000ha of plantation land for RM248 million per annum plus 15% profit for a 99-year period. The termination could cost Felda around RM4 billion, according to analysts.

The lower-than-expected profit earned by Felda from the LLA was one of several issues sought to be addressed by the government in the body, following a review by a special task force last year.

Following the unsuccessful attempt, Felda will now have to address the minimum requirement on public shareholding spread at FGV. Bursa Malaysia requires a public shareholding spread of 25%, as opposed to 19% in FGV currently.

What is next for FGV?

The cold shoulder that Felda received from FGV minorities is seen as an indication that the offer price of RM1.30 per share was not that attractive, especially against the back of strong crude palm oil prices. The three-month futures exceeded RM4,000 to RM4,138 on Monday.

It appears that Felda will be back to the drawing board. Will the termination of LLA materialise? If so, will FGV be compensated accordingly?

More importantly, the revamp of FGV seems to have been disrupted by the privatisation exercise, said some analysts. It would be crucial to know what Felda has in the pipeline to rejuvenate the plantation group.

Furthermore, tycoon Tan Sri Syed Mokhtar Albukhary's investment vehicle Perspective Land (M) Sdn Bhd had expressed interest in injecting assets into FGV through a share swap exercise.

However, FGV on March 8 said it was not pursuing the offer, in view of Felda's takeover bid.

Adding a new twist to the slew of events at FGV, the strong rebound of MSM Malaysia Holdings Bhd's share price has fanned speculations about a major corporate exercise brewing at the sugar refinery, in which FGV controls a 51% stake, while Felda owns a 9.43% stake.

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