Malaysians will end up paying for Felda’s plantation buy, says DAP MP

Serdang MP Ong Kian Ming says Malaysians will end up paying for Felda Global Ventures Holdings Bhd’s purchase of a stake in Indonesian palm oil company Eagle High Plantations (EHP) for US$679 million (RM2.5 billion). – The Malaysian Insider file pic, June 16, 2015.

Malaysians will pay the price for Felda Global Ventures Holdings Bhd (FGV)’s purchase of a stake in Indonesian palm oil company Eagle High Plantations (EHP) for US$679 million (RM2.5 billion), says DAP lawmaker.

Serdang MP Dr Ong Kian Ming said that the acquisition of a 37% stake in EHP will see Rajawali Group, which is controlled by Indonesian billionaire Peter Sondakh, enjoyed an estimated profit of US$328 million in just six months.

He added that given that the share price of EHP has been performing poorly on the Jakarta Stock Exchange,  the proposed acquisition reeked of the same kind  of poor corporate governance that landed debt-ridden state fund 1Malaysia Development Bhd in financial trouble.

He added that it was highly possible that shareholders of FGV which includes Felda settlers as well as the members of the public, through shares offered by Retirement Fund Incorporated, Lembaga Tabung Haji and Employees Provident Fund, will have to pay for these poor decisions.

Back home, the market reacted negatively to the planned purchase, with FGV's share price dropping from yesterday's opening bell at RM1.86 to RM1.65 at the closing bell, a fall of 21 sen or a one day fall of 11% in the share price.

EHP was originally known as BW Plantation before it was acquired by the Rajawali Group at the end of 2014.

The Rajawali Group gained controlled of BW Plantation by subscribing to a rights issue priced at Rp400 per share (11 sen).

According to Ong, since the acquisition of BW Plantation, the share price of EHP had been performing poorly, hitting a low of Rp245 per share on April 5.

He added the proposed acquisition by FGV would give the Rajawali group a profit of approximately US$328 million on the 11.664 billion shares of EHP (most of it likely acquired at Rp400 per share) which it would sell to FGV if the proposed deal was approved.

"This is a tidy sum indeed for the Rajawali group which will succeed not only in making a tidy profit in six months but also still hold effective control of EHP after its share disposal to FGV," Ong said.

He added that even if FGV decides not to go through with the proposed buy, it would lose its deposit of US$174.5 million (RM657.9 million) which represented approximately 23% of the total value of the transaction.

According to Ong, this deposit was considered high by a CIMB analyst report which noted that a regular sale and purchase agreement only requires a 10% deposit.

He said the proposed acquisition was a poor decision by the management and the board of directors of FGV.

- TMI