Felda privatisation proposal seen neutral for FGV shareholders

PETALING JAYA: The proposed takeover offer for FGV Holdings Bhd, floated by its major shareholder, the Federal Land Development Authority (Felda), is viewed as one that is neutral for FGV shareholders, according to CGS-CIMB Research.

In a note, the research house said the offer is “bittersweet” for FGV shareholders, as the offer price of RM1.30 a share is at a 3% discount to its previous target price (RM1.34) and only 2% premium to FGV’s last closing price.

“However, this is probably a better option for FGV shareholders than having FGV’s share prices being negatively impacted by concerns over the termination of the land lease agreement (LLA) or dispute over compensation terms.

“The downside is that most long-term shareholders of FGV will have to realise a significant loss from FGV’s IPO price of RM4.55 and will not be able to enjoy the upside of higher fresh fruit bunch yields from its replanted estates or stronger CPO prices,” it noted.

However, it said while the deal is probably more favourable to Felda than FGV’s shareholders, the offer presents an avenue for large FGV shareholders to exit their position.

On Tuesday, Felda said it will acquire a 13.88% equity interest in FGV held by two state-linked agencies – Retirement Fund Incorporated (KWAP) and investment holding company Urusharta Jamaah – for RM658 million in cash, raising its stake in FGV to more than 50%.

Felda also proposed a mandatory takeover offer for the remaining FGV shares it does not already own upon the completion of the equity deal.

CGS-CIMB said this option is the cheaper one for Felda compared to pursuing a termination of the LLA.

FGV had previously estimated that it could receive a compensation as high as RM3.5 billion to RM4 billion excluding its mills.

CGS-CIMB is maintaining its ‘hold’ call on FGV, with a lower target price of RM1.30, from RM1.34 previously.