PETALING JAYA: Felda Global Ventures Holdings Bhd (FGV) is set to acquire a stake in an Indonesian oil palm company, expanding the group’s plantation assets in the republic, even as it seeks to exit refining business in North America.
Sources told StarBiz that FGV was proposing to purchase a substantial stake in Jakarta Stock Exchange-listed Eagle High Plantations Tbk at 800 rupiah a share.
The transaction values the Indonesian planter nearly twice as much as its current market capitalisation of 13.9 trillion rupiah (US$1.04bil or RM3.89bil).
“The deal is likely to be sealed in Jakarta anytime soon,” a source said.
FGV has suspended its trading of its shares today pending a material announcement. Its shares were was last traded six sen lower at RM1.86.
Shares in Eagle High, which is 65.5%-owned by billionaire Peter Sondakh’s Rajawali Group, rose to 440 rupiah yesterday – its highest level since November last year.
On Wednesday, Rajawali Group managing director Darjoto told Bloomberg that the company was selling an 18.5% stake in Eagle High to an unnamed buyer.
Sondakh acquired the controlling stake in Eagle High in December last year, reports said. The planter has 419,000ha of plantations with an average palm tree profile of 6.72 years across Kalimantan, Sulawesi, Papua and Sumatra provinces.
In February this year, BW Plantations Tbk underwent a name change to PT Eagle High Plantations Tbk to reflect the new controlling shareholder, Rajawali Group.
The Rajawali Group is involved in mining, plantations, hotels and transportation.
In Malaysia, the Rajawali Group, with its joint-venture partner the Finance Ministry, is developing the RM300mil St Regis Langkawi hotel and the RM115mil Langkawi International Convention Centre. The 5-star hotel is slated for opening in November this year.
Meanwhile, Bloomberg reported that FGV was seeking a buyer for peripheral assets in North America, people with knowledge of the matter said.
The company has invited offers for its crushing and refining businesses in the US and Canada, the people said. Suitors have submitted first-round bids for the operations, which could fetch about US$150mil (RM560.67mil), they said, asking not to be identified as the information was private.
FGV said earlier this year it would sell some assets as it sought to increase its core palm oil plantation business, expand trading operations and develop new markets.
Shares in the company, whose 2012 initial public offering (IPO) raised US$3.3bil, have dropped 12% this year compared to the 1.5% decline in the benchmark FTSE Bursa Malaysia KL Composite Index.
The company’s Canadian arm, which does soybean and canola crushing, recorded a pre-tax loss of RM81.8mil (US$21.9mil) last year, according to its 2014 Annual Report.
Its US oleochemical business recorded a profit of RM36.5mil for the period.
FGV has operations in more than 10 countries across Asia, North America and Europe including upstream and downstream palm oil, rubber, sugar and logistics.
Last month, it announced a 98% drop in first-quarter net income due to lower palm oil prices.
The company said in an e-mailed statement it didn’t comment on planned acquisitions or divestitures.
Over the past three years, FGV has been on an aggressive brownfield plantations acquisition trail.
The major acquisitions are mostly financed from its IPO proceeds of RM4.5bil.
They include the RM1.2bil takeover of Sabah-based plantation company Pontian United Plantations Bhd, the RM2.2bil purchase of the remaining 51% stake in its associate company Felda Holdings Bhd, RM44.2mil to buy a 95% stake in two plantation companies with 21,037ha of oil palm estates in West Kalimantan and £120mil Asian Plantations Ltd with plantation assets in Sarawak.
Its latest proposal is to acquire four plantation-based firms and 836.1ha oil palm land in Sabah from Golden Land Bhd for RM655mil cash.
FGV group chief financial officer Ahmad Tifli Mohd Talha recently said that FGV was set on improving its crop-age from an average of 15.6 years currently to 11.8 years in 2020.
“Not only will this significantly reduce our production costs and offer better margins, it will enable us to remain the largest crude palm oil producer in the world”.
As of March 31, FGV had a cash hoard of RM2.9bil in its balance sheet.
“At a gearing ratio of 0.7 times, we still have the capacity to borrow (if need be). Going for sukuk will offer lower financing costs for us compared with commercial loans,” added Tifli.
He also maintained that mergers and acquisitions would remain part of the group’s expansion plan, going forward.