KUALA LUMPUR: Felda Global Ventures Holdings Bhd (FGV) will make an announcement today and give further details on its plan to acquire a 37 per cent stake in Indonesia’s PT Eagle High Plantations for US$680 million (RM2.9 billion).
“We will announce our decision on Monday (today),” FGV group president and chief executive officer Datuk Mohd Emir Mavani Abdullah replied in a text message to a Business Times query yesterday.
In its latest filing with Bursa Malaysia, FGV said it was still negotiating the terms of the definitive agreement and that the deadline would expire today.
Indonesian conglomerate Rajawali Group owns 65.5 per cent of Eagle High.
Five months ago, FGV, which is the world’s largest crude palm oil producer, told Bursa Malaysia it signed a heads of agreement with Rajawali to acquire a 37 per cent in Eagle High for US$680 million in cash and stocks.
FGV was to pay US$632 million in cash for a 30 per cent stake and issue 95 million new FGV shares for the other seven per cent stake.
FGV was also buying a 95 per cent stake in Rajawali’s sugar project for RM249 million.
In the last five months, analysts had termed the proposed deal as “overpriced”.
Credit Suisse downgraded FGV to “underperform” from “neutral”.
“We worry that Rajawali, which will end up with 95.4 million FGV shares, could sell them in the open market. This will cause an overhang on FGV’s share price,” it said in a report.
It also believed that the deal was too expensive for FGV.
FGV’s net gearing would have increased to 102 per cent in financial year 2015 from an earlier forecast of 51 per cent. Its net debt would increase to an estimated RM6.6 billion from RM1.7 billion as at March 31.
Alliance DBS Research said FGV might face selling pressure on
the acquisition of Eagle High,
which was priced at a more than 70 per cent premium to the latter’s closing price.
CIMB Research analyst Ivy Ng wrote that FGV would be Eagle High’s largest but not controlling shareholder, and the acquisition could dilute FGV’s net profit for its 2016 fiscal year by 10 per cent.
“We are of the view that the proposed acquisition price for Eagle High is too high.”
FGV’s net gearing would rise to 1.43 times shareholders’ funds from 1.05 times, and its cash flow would also be hurt, she added.
Maybank Investment Bank Research noted: “We believe that this proposal is unlikely to go down well with investors, as the acquisition is likely to be earnings per share dilutive in the short term, given the steep transaction price for a non-controlling stake of 37 per cent.”
Meanwhile, UOB Kay Hian Research analyst Chan Yuan She said the speed of the acquisition came as a surprise.
“We are not positive on the Eagle High acquisition as it is expensive and cash flow will be tight due to the high capital expenditure.
“This second acquisition of a 37 per cent stake in Eagle High will make FGV the single largest shareholder, followed by Rajawali with 31.6 per cent. FGV is also unable to consolidate Eagle High’s landbank,” she noted.
Currently, Eagle High has a total landbank of 425,000ha, with 67 per cent located in Kalimantan and the rest spread over Papua New Guinea (nine per cent), Sulawesi (19 per cent) and Sumatra (five per cent).
There are 152,000ha planted with 24 per cent immature palms and 76 per cent mature palms, with the average profile of the palms at eight years old.