SHOCK DEAL: Felda to buy 25% stake in smartcard maker Iris, to pay 40% PREMIUM

KUALA LUMPUR - Just a day ago, in a blaze of media publicity, Prime Minister Najib Razak's government pressed charges against 2 senior officers of a Felda for misappropriating some RM30mil.

Given Najib's direct links to the land settlement giant, the move raised eyebrows more than it won kudos as many found it hard to believe the PM was really serious about weeding out corruption, not only at Felda but in the top echelons of his government. They were right to be cynical.

The same day, with much less fanfare, Iris Corp Bhd - a company that makes smart cards for many government projects and has long been associated with former premier Mahathir Mohamad - announced that Felda would buy 394 million new shares and was willing to pay a 40% premium!

The new Iris shares to be sold to Felda are being priced at 28 sen apiece, much steeper than its last traded price of 21.5 sen share.

"At first glance, there are question marks all over and you cannot blame investors for doubting or the man in the street for thinking something is fishy. Because of their past scandals, it would be hard to believe that this deal is done at arms-length unless both sides make efforts to convince investors as well as Felda settlers," PKR vice president Chua Jui Meng told Malaysia Chronicle.

We accept Felda's offer

Felda's purchase will throw a lifeline to the languishing Iris, which has previously come under fire for its problematic e-Passport inlays. In a statement to market regulator Bursa Malaysia, Iris said Felda had written in on Thursday, offering to buy the new Iris shares.

The Iris board said it has accepted the offer, which would result in Felda holding a 25% stake Iris. The sale will rake in in some RM110.3 million for Iris, which in 2008 had made global headlines after it was accused of market manipulation and came under an international probe.

The main shareholders in Iris are Tan Say Jim, who has a combined direct and indirect stake of 10.97 per cent in the company, followed by Perbadanan Nasional Bhd with a 8.39% direct stake.

“It’s an early Raya festive cheer for Iris shareholders, and it’s also good for the retail market, which is always looking to punt on penny stocks,” Business Times reported a dealer at RHB Securities as saying.

But will it be as festive for Felda?

Stick to core business

Critics with long-held reservations about the well-being of land settlement agency, which is also the world's largest oil palm planter, minced no words about the deterioration they foresee in Felda, pinning the blame squarely on Najib. Felda is directly overseen by Najib's office.

"Felda is a major producer of palm oil to the world and this is a growth industry because of expectations of a booming world population. We all need to eat and edible oils area necessity. What does Felda know about smart cards?" MP for Wangsa Maju Tan Kee Kwong, a former deputy minister who had helped manage Felda, told Malaysia Chronicle.

"Felda must stick to its core business. Learn from the lesson of Sime Darby, also a plantations player. When Sime tried to go into banking, it lost billions.

Fitch downrade

Kee Kwong had minced no words when asked what he though of Friday's high-profile prosecution of KPFQ Foods Sdn Bhd's chief executive Sarchu Sawaland KPFQ director Tan Han Koon.

Sarchu was accused of misusing RM16.9 million while Han Kook of misappropriating RM13.1 million. Both men pleaded not guilty.

"Felda was forced to borrow RM6bil from the Employee Provident Fund. What sort of management does this show? We are talking about billions, so RM30 million while welcomed news is only a decimal place, a tiny dot on the tip of a giant iceberg," Kee Kwong had said.

"It is clear Prime Minister Najib Razak is not doing his job, so don't put on a big media show as though he is serious about fighting graft. There is no improvement, there may even be backsliding.

"The latest proof is in the Fitch downgrade. It is the most shocking thing, an international slap in the face for Malaysia and also for Najib's leadership of the country. At the same time, it vindicates and backs up all that we in the Opposition have been accusing the BN government of - mass pilferage, dishonesty and endemic corruption."