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Other funds should also oppose acquisition of EHP

Employees Provident Fund (EPF) CEO Shahril Ridza Ridzuan confirmed yesterday that the EPF’s representative questioned the rationale behind the US$680 million, or RM2.55 billion, acquisition of Eagle High Plantations (EHP), particularly the generous premium reportedly accorded to the deal, at Felda Global Ventures Holdings Bhd’s (FGV) annual general meeting (AGM) on Tuesday.

 

We fully support the position EPF questioning the unbelievably expensive acquisition of EHP, which was traded at 72 percent above its last traded price and 267 percent above CIMB Research’s fair valuation of the company. There was not a single investment research house which did not have a negative report on the proposed acquisition.

 

CIMB also warned that the group “may have to write down the value of EHP post acquisition to reflect current market price, post this acquisition. The write down could amount to RM1.07 billion”. The amount is massive relative to FGV’s net profits of only RM306.4 million for its financial year ending December 2014, a 69 percent drop from RM982.2 million in the previous year.

 

FGV has been the undisputed worst plantation stock performer ever since its initial public offering (IPO) in July 2012. The share price decline was so bad that the company was removed from the Bursa Malaysia KLSE Index stocks.

 

As of yesterday, the market was unanimous in giving FGVH a big thumbs down for the proposal.  The share price, already at a record low of RM1.86 before the announcement of the deal, tanked a further 9.7 pecent to RM1.68.  This price represents a 63 percent drop since its initial public offering (IPO).

 

We urge all other institutional funds which invests on behalf of Malaysian taxpayers to openly oppose the deal to ensure that FGV performance does not get any worse than it already is.

 

Besides the EPF which owns a 5 percent stake in FGV, other major shareholders include Lembaga Tabung Haji, Retirement Fund Incorporated (KWAP) and the Pahang government, which hold 7.8 percent, 5.6 percent and 5 percent, respectively.

 

The other government entities which must raise their objections to the deal are Lembaga Kemajuan Tanah Persekutuan (Felda), Felda Assets Holding Company and Koperasi Permodalan Felda Malaysia owning 20 percent, 13.66 percent and 5.75 percent respectively.

Further losses to FGV can be averted

 

If the above funds were to combine their shareholding strength of 62.8 percent, the acquisition exercise will be stillborn and further losses to FGV can be consequently averted.

 

The above funds and institutions must publicly pledge their opposition to the exercise because the entire deal stinks to high heavens with the insidious objective of allowing PT Rajawali Capita, the seller of EHP shares to profit astronomically.

 

The Rajawali group, which is controlled by Indonesian tycoon Peter Sondakh, had only acquired their stake in EHP at an average price of Rp400 in December 2014.  Less than six months later, FGV decides to the said 37 percent stake at Rp775, giving Peter Sondakh an eye-popping profit of US$328 million (RM1.23 billion). Why is a Malaysian government-linked company helping to further enrich an Indonesian tycoon, who just happens to be the prime minister’s friend?

 

Prime Minister Najib Abdul Razak and his cabinet ministers must put a stop to the above exercise to prevent Felda settlers from losing even more money in the investment turkey.


 

TONY PUA is DAP national publicity secretary and Member of Parliament for Petaling Jaya Utara.

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