Delisting risks still cloud FGV

Investors could be buying up FGV shares, hoping Felda may be willing to offer a higher price to takeover the company at a later date.

KUALA LUMPUR: Given that delisting risks remain for FGV Holdings Bhd (FGV), CGS-CIMB Research is keeping a “hold” call on the planter with a target price of RM1.30 premised on the previous takeover offer price and in anticipation that the Federal Land Development Authority (Felda) would still pursue a delisting.

“Until Felda reveals its intent for FGV’s listing status, we keep our hold call, ” the research house said.

This week, Felda failed to obtain sufficient shares to delist FGV.

Felda obtained a total of 80.99% stake after the March 15 deadline of its offer to buyout minority shareholders in the company.

This was short of the 90% threshold required for Felda to make a compulsory takeover to buyout the remaining shareholders.

Following Felda’s failed attempt to take FGV private, CGS-CIMB Research expects three potential scenarios to take place.

One scenario could lead to FGV requesting Bursa Securities to accept a lower percentage public spread if it is satisfied that such a lower percentage is sufficient for a liquid market in such shares.

Bursa Malaysia requires a public shareholding spread of 25% compared to 14.01% in FGV currently.

Meanwhile, the second scenario could result in FGV requesting an extension of time to rectify the situation, the research house said.

“The third scenario is that FGV could request to withdraw its listing from the official list if it convenes a general meeting to obtain its shareholders’ approval and successfully passed the resolution which requires 75% of the total number of issued securities held by the shareholders present and voting either in person or by proxy and the number of votes cast against the resolution is not more than 10%, ” it added.

In a filing to Bursa Malaysia, FGV said its controlling shareholder, Felda needed more time to formulate a plan on the group’s listing status.

“In view of the above, FGV had on March 16 submitted an application to Bursa Securities for an extension of time in accordance with Paragraph 8.02(4) of the Listing Requirements to rectify the shortfall and to allow sufficient time for the Offeror to formulate a firm plan on FGV’s listing status, ” it added.

Besides that, FGV’s share price rose 20.77% to RM1.57 on March 16 after its privatisation exercise failed.

“Investors could be buying up the shares by taking the speculative view that Felda may be willing to offer a higher price to takeover the company at a later date, or that Felda intends to maintain the listing status with lower public spread, ” it explained.

However, CGS-CIMB Research believes that it is too early to conclude as Felda still has the option to call for an AGM and pass the resolution to withdraw FGV listing from the official list.

“If they are successful, FGV share price could fall back to RM1.30, where a cash offer will likely be made, due to delisting risks, ” it noted.

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FGV , Felda , delisting


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