Felda Global explores asset injection to unlock value of logistics arm

KUALA LUMPUR: Malaysia’s largest plantation company, Felda Global Ventures Holdings Bhd (FGV), is exploring options to unlock the value of its logistics arm by injecting the division into either a listed or unlisted entity.

In this respect, Century Logistics Holdings Bhd is one of the companies that the plantation group is exploring to undertake the exercise.

“There are a few other companies as well. But the proposal is for FGV to inject its logistics arm in return for new shares. It will not go into a deal to buy out the interest of existing shareholders,” said a source close to FGV.

It was reported by a local daily on Thursday that the Felda group was in talks to acquire a significant stake in Century Logistics, possibly from its largest shareholder, Datuk Richard Phua, who has a 26.4% stake in the company.

A FGV spokesperson said the company was currently evaluating several proposals from other logistics companies in its efforts to enhance and unlock the full potential of its logistics value chain.

He pointed out that the company, in its quest to become a top-10 agri-commodity player within the next eight years, would continue to explore potential mergers and acquisitions to support its growth strategy.

“But there is nothing conclusive that has been agreed and/or decided on (Century Logistics). Thus, at this juncture, FGV has no material information to disclose to our stakeholders and Bursa Malaysia,” the spokesperson said.

Century Logistics, in a statement to Bursa, confirmed that the company was exploring a potential corporate exercise with the Felda group, although nothing conclusive has been agreed upon.

“Century Logistics will make the necessary announcement at the appropriate time when there are material developments relating to the same,” it said.

The logistics arm is a wholly owned subsidiary of Felda Holdings Bhd, which was only 49% owned by FGV until late last year.

In December last year, FGV acquired the remaining 51% in Felda Holdings for RM2.2bil, resulting in the company holding 100% of the logistics division.

The acquisition saw FGV benefitting significantly from Felda Holdings’ diversified services and facilities in the upstream and downstream activities, as well as other related and non-palm oil-related services.

Felda Holdings is the world’s largest crude palm oil (CPO) producer, producing over three million tonnes annually, managing 138 Felda-owned estates, 71 palm oil mills, seven refineries, four kernel crushing plants, 13 rubber factories, manufacturing plants and several logistics and bulking installations spread throughout Malaysia and several locations overseas.

It has an extensive network of lorries and tankers to transport the fresh fruit bunches and CPO to be processed and delivered to bulking terminals.

However, the logistics business is tough to handle because it requires a lot of cost-control processes to be put in place.

“If it is injected into a separate company, then it will have a balance sheet that will be more transparent. Hopefully, the leakages will minimise,” said an official in the plantation industry.

FGV president and group chief executive officer Mohd Emir Mavani Abdullah had indicated recently that the major thrust for FGV to address this year is the cost structure management within the group such as the mechanism of replanting, labour and logistics right down to the palm oil mills’ efficiency and the oil extraction rate.

“The logistics division is one area whereby reducing the cost and improving the quality of logistics and transportation systems will also help to improve the international access,” said analysts.

Meanwhile, shares of Century Logistics closed at its day low of RM2.68, up three sen, with 1.75 million shares being traded.