FELDA's deal will not affect settlers, acquisition at favourable value

The Federal Land Development Authority (FELDA)'s plan to acquire a 37 per cent stake in Indonesia's PT Eagle High Plantation Tbk (EHP) will not affect the well-being of settlers.

This is because the deal is a stand-alone investment with its own financing, while the US$505.4 million (RM2.26 billion) value is favourable with recent transactions involving an Indonesian palm oil company.

"The deal will not impact FELDA's existing commitments and programmes to improve the wellbeing of the settlers," said FELDA.

FELDA is to acquire the stake through its unit, FIC Properties Sdn Bhd. For this purpose, FELDA had signed a Sale and Purchase Agreement (SPA) with Rajawali Group.

Refuting claims that FELDA is paying too high a premium over market price of EHP shares, it clarified 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 (ev/ha), which is US$16,000 ev/ha, which is what FELDA paid for the 37 per cent stake.

"This value compares favourably with recent transactions involving an Indonesian palm oil company," FELDA said in a statement amid claims that FELDA was paying as high as 173 per cent premium for the stake.

It cited KL Kepong Bhd's recent final offer of US$15,500 ev/ha was rejected by MP Evans board as the latter's independent valuation put their value at US$17,300 ev/ha.

"MP Evans board has asked for valuation of US$24,000 ev/ha for the company. At US$505.4 million (RM2.26 billion), FELDA is purchasing EHP stake at US$16,000 ev/ha. MP Evans planted land 31,400 ha.

"EHP planted area is 125,000 ha. So, FELDA is purchasing access to land four times the size of MP Evans at a lower ev/ha than MP Evans independent valuation. Also the concluded purchase by Sime Darby of New Britain Palm Oil Ltd was at an ev/ha of US$27,000," it explained.

Besides, it said share price also does not reflect true value because EHP shares are mainly controlled 70 per cent by Rajawali Group.

Moreover, it is listed on the Jakarta Stock Exchange where it is not as liquid as Bursa Malaysia or the Singapore Stock Exchange.

Hence, the purchase price took into account scarcity value of EHP and no other plantations of this large size is available for sale, especially at this valuation, it said.

"This is the last opportunity for FELDA/Malaysia or any other foreign parties to acquire an Indonesian company with massive land bank. The Indonesian government agrees to one-time exception to this deal," said FELDA.

The deal will improve FELDA's crop profile as the average age of EHP's trees is seven years versus FELDA's 15 years and there would be a lot of collaborations and cross selling between FELDA and EHP.

"Potential new businesses and synergies for FELDA Group in seedling, fertilizer, crude palm oil trading, downstream/oleo-chemical; and potential entry into vast Indonesian market of 260 million people for FELDA Group's finished and consumer products," it said.

And on top of it, investment in a major palm oil player in Indonesia is in line with the Malaysian government's effort to ensure the country continues to be a major player in the global palm oil industry.

"It will act as an impetus to move forward the agenda of the recently established Council of Palm Oil Producing Countries (CPOPC) to stabilise global palm oil prices," it added. -- Bernama