Indonesia's Rajawali to maintain 2.55% stake in Felda Global Ventures

PETALING JAYA: The Rajawali Group has no immediate plans to seek a bigger stake in Felda Global Ventures Holdings Bhd (FGV), even as the two companies plan to complete a deal by August,

Earlier this month, FGV had proposed to buy a 37% stake in Rajawali’s PT Eagle High Plantations Tbk for cash and shares in a deal worth US$680mil (RM2.5bil).

FGV is also buying sugar cane plantations from the Rajawali Group for US$67mil.

The deal, which needs to be approved by FGV’s shareholders at an upcoming EGM, will see Rajawali taking up a 2.55% stake in the company.

“We need to first keep our focus on closing the deal at hand,” said Arief Sidarto, an executive adviser to Rajawali’s chairman Tan Sri Peter Sondakh.

“That said, nothing prevents us from taking a higher stake in FGV in the future,” he told StarBiz when met yesterday.

Sidarto was in Kuala Lumpur yesterday to help FGV’s management explain the proposed deal to financial analysts and fund managers.

The local investment community has been very critical of the deal, citing concerns about the high price that FGV is paying for the stake in Eagle High.

CIMB analyst Ivy Ng said the potential synergies from the deal in the form of potential downstream expansion and collaboration would not be sufficient to outweigh concerns.

“We continue to believe that the acquisition price for Eagle High, which is at a premium of 85% to its current share price, is too high and the acquisition would be earnings and cashflow dilutive for FGV,” she said in a report yesterday after the briefing.

But the deal could be even more expensive for FGV if it were to take a majority stake in Eagle High. Rajawali managing director Darjoto Setyawan told reporters in Jakarta yesterday that the company would seek at least 21% of FGV if the Malaysian planter seeks a controlling block of shares in Eagle High. “It can be a form of share swap,” he said, as quoted by Reuters.

Sidarto, however, ruled out any big changes from the original proposed deal.

“I think it is unlikely that FGV will go for a majority stake in Eagle High,” he said.

FGV told analysts on Wednesday that it had used a combination of the discounted cash flow and enterprise value per ha (EV/ha) methods to arrive at the acquisition price for Eagle High at US$680mil or 775 rupiah per share.

This also works out to an EV/ha of US$17,400. It also argued that the deal is the cheapest, on an EV/ha basis, compared with its recent purchases.