KUALA LUMPUR: After a flurry of purchases by the Federal Land Development Authority (Felda) for its shares in the past few days, FGV Holdings Bhd’s public listing journey appears to be ending, according to an economist.
Putra Business School’s Business Development senior lecturer and manager, Prof Dr Ahmed Razman Abdul Latiff said when FGV was listed in 2012 at an initial public offering (IPO) price of RM4.55, its market capitalisation was just below RM17 billion.
“It was the second largest flotation exercise by market value in the world, only behind Facebook. Currently its market capitalisation stood at RM4.74 billion,” he told Bernama.
According to him, last year in October when current Felda chairman, Datuk Seri Idris Jusoh mooted the idea of terminating Felda’s land lease agreement (LLA) with FGV as well as acquiring the latter’s mills, the move was seen as an effort to please Felda settlers at the expense of FGV shareholders.
The LLA termination would potentially decrease FGV’s share price involving shareholders such as Retirement Fund (Incorporated) or KWAP and Urusharta Jamaah Sdn Bhd (a subsidiary of MOF Incorporated) which are both government-linked investment institutions and Koperasi Permodalan Felda, and cause it to lose its competitive advantage and sustainability.
“And to rub salt to the wound, the estimated RM5 billion to RM6 billion cost of termination will come from the taxpayers as Felda simply do not have such amount, and such move will be only made possible by additional fund injected by the government.
“It does not even make sense further when Felda itself was deep into its own debts, which is nearing RM10 billion,” he said.
Thankfully, Ahmed Razman said common sense prevailed and with its issuance of RM9.9 billion government-backed sukuk, Felda decided to service its own debt and use the rest to acquire FGV instead, which will consolidate control and operation of land and oil mills under one unified body.
“Once collective FGV shareholding of Felda and persons acting in concert with it rose past 50 per cent on Dec 8, 2020, Felda’s takeover offer for FGV became unconditional, which sees a flurry of share purchases for the past few days.
“On top of its RM605.8 million acquisition of FGV shares from both KWAP and Urusharta Jamaah which constitute a 13.88 per cent stake, Felda have so far spent more than RM100 million purchasing the remaining shares on the open market,” he said.
Last Thursday, Felda bought 9.97 million more shares in FGV Holdings Bhd from the open market for RM12.96 million at RM1.30 apiece. This raised the number of FGV shares acquired by Felda so far this week to 75.97 million shares.
Earlier in the week, the agency bought 66 million shares via the open market at RM1.30 each for a total of RM85.8 million.
Last week, Felda announced in two filings that it had purchased a total of 27.15 million FGV shares from the open market for RM1.29 each, or RM35.02 million.
This came after the agency issued its offer document on Tuesday last week (Jan 12) in relation to its unconditional mandatory takeover offer for all the remaining shares in FGV which it does not own, except treasury shares.
Its offer of RM1.30 per share will be open for acceptances until 5 pm on Feb 2, unless extended or revised.
On Dec 8, 2020, Felda, which already owned 21.24 per cent equity interest in FGV, increased its stake in the company to 35.12 per cent and proposed to take FGV private at RM1.30 a share.
The additional 13.88 per cent stake was bought from KWAP (6.1 per cent) and Urusharta Jamaah Sdn Bhd (7.78 per cent).
“At the current offer price of RM1.30 a share, FGV is now valued at some RM4.75 billion (based on its issued share capital of about 3.65 billion), which is less than one third from before.
“It remains to be seen whether Felda will be able to do a turnaround for both entities once the takeover is completed.
“When political consideration is part of its strategic turnaround, the concern is whether there will be another financial bailout by the government at the expense of Malaysian taxpayers if things did not go as planned,” said Ahmed Razman. — Bernama