PETALING JAYA: Felda Global Ventures Holdings Bhd (FGV) says terminating its current land lease agreement (LLA) with its parent company, Federal Land Development Authority (Felda), will be the last resort for the listed plantation conglomerate.
FGV president and group CEO Datuk Zakaria Arshad said: “As far as the LLA agreement is concerned, FGV deems it as a key component of our plantation business.
“Any variation to it will be of significant interest that will be subjected to board and shareholders’ approval at an extraordinary general meeting.”
To date, about 335,000 ha from Felda’s total landbank of 850,000 ha are currently run by FGV under the LLA signed in 2012.
Recently, there have been news report indicating Felda’s intention to seek the return of its land currently leased out to and managed by FGV because it feels that it could extract higher returns.
Felda is believed to be exploring new ideas to squeeze more out of its investment assets and maximise its investment in FGV. This proposal is said to be more cost-effective way to retake FGV’s landbank as opposed to an outright privatisation exercise, which would cost billions of ringgit.
Zakaria told reporters during a media familiarisation to FGV Innovation Centre at Bandar Enstek in Nilai yesterday that FGV is open to any suggestions or proposals by Felda for the greater good of all its stakeholders.
“Therefore, Felda should be talking directly to FGV if there is anything that they are dissatisfied with. FGV will try its best to explain on various issues in hand to the Felda management,” added Zakaria.
On Tuesday, in a filing with Bursa to clarify on the various news report on the LLA, FGV said its board of directors has not received any notifications from any shareholders on transactions and neither has the board discussed such matters in its meetings.
The FGV management will remained focus on its effort to improve its performance and deliver value to its shareholders by higher asset productivity, operational efficiency and cost optimisation.
“Any merger and acquisition activities will only be considered if it enhances shareholder value,” FGV added.
If there is any development or material information on this matter, FGV will make the necessary announcement
To recap, FGV is tied to the strict terms of its LLA with Felda, which many market analysts say has distorted in the calculations of its profit.
The LLA signed in 2012 has two components whereby Felda is compensated.
FGV has to pay Felda a fixed amount of about RM250mil per year in cash for 20 years and the second component is a 15% share of operating profit from the sales of FFB derived from the estate land leased from Felda.
FGV is the only plantation company in Malaysia that adopts the unique LLA business model that has paved the way for its listing exercise back in June 2012.
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