PETALING JAYA: FGV Holdings Bhd’s shareholders should accept the takeover offer by the Federal Land Development Authority (Felda) given the limited upside for FGV’s share price, according to CGS-CIMB Research.
The recommendation from the research house came three days after five of FGV’s non-interested directors rejected Felda’s takeover price of the plantation giant.
Prior to this, RHB Investment Bank had advocated for shareholders to agree to the offer, pointing out that while the takeover price of RM1.30 per share was not fair, it was reasonable.
For context, RHB Investment Bank is the independent adviser appointed by FGV on the takeover bid.
CGS-CIMB Research said in a note yesterday that the conflicting advice provided on the takeover bid could be due to different expectations for FGV’s share price performance after the offer period ends.
“The independent directors may be of the view that the share price will rise with better crude palm oil prices and improved estates’ age profiles.
“We concur that this could be the case should the overhanging issue relating to terminating the land lease agreement (LLA) is put to bed.
“However, if this issue is not addressed, investors will likely continue pricing the stock at a discount to its sum-of-parts (valuation), ” stated the research house.
It is unlikely for FGV to see a competing takeover offer from another party, according to CGS-CIMB Research.
This is following recent developments related to FGV, apart from the fact that Felda has acquired more than 50% control over the oil palm planter.
“FGV’s free float will also fall post the takeover offer. As such, we favour accepting the offer given the limited upside at the current price level and risks considered.
“We retain our ‘hold’ call and target price of RM1.30 to reflect the takeover offer price, ” it said.
On Jan 22, RHB Investment Bank via its independent advice circular said Felda’s offer price of RM1.30 per share was not fair as it is lower and represents a discount of between 12 sen (8.5%) and 30 sen (18.8%) over the range of estimated value per FGV share derived using the sum-of-parts valuation method of between RM1.42 and RM1.60.
On the other hand, it is of the view that the offer is reasonable as there is no alternative proposal, offerors and persons acting in concert (PACs) that have a majority control of 54.09% and the offeror does not intend to maintain the listing status.
However, five non-interested directors of FGV have said that they do not concur with RHB Investment Bank’s independent advice to accept the offer.
The non-interested directors are Datuk Yusli Mohamed Yusoff, Datuk Mohd Anwar Yahya, Datin Hoi Lai Ping, Dr Mohamed Nazeeb, P. Alithambi and Dr Nesadurai Kalanithi.
The five directors argued that firstly, the offer price by Felda represents a discount of 8.5% to 18.8% to FGV’s fair value.
Secondly, FGV is undergoing transformation based on a plan implemented by the management since 2019.
Thirdly, keeping FGV as a public listed company will ensure transparency and timely disclosures.
Fourthly, the offer price is below the initial public offering price of RM4.55 and does not take into consideration the significant improvement in the quality of plantation assets on the back of the improved age profile of its estates, enhancements to housing and increased landbank size.