MARKET DEVELOPMENT
FGV Justifies Purchase Consideration Of Stake In Eagle High
FGV Justifies Purchase Consideration Of Stake In Eagle High
18/06/2015 (Bernama) - Felda Global Ventures Holdings Bhd (FGV) said its purchase consideration for a 37 per cent stake in Indonesia's PT Eagle High Plantations Tbk for US$680 million represents an implied Enterprise Value (EV) per hectare of approximately US$17,400 for the planted oil palm estates in Eagle High (US$1=RM3.74).
In arriving at the amount, FGV said it considered, among others, palm oil plantation transactions undertaken since 2013 like the acquisition of New Britain Palm Oil Ltd (NBPOL) by Sime Darby in 2014 and of Unico-Desa Plantations Bhd by IOI Corporation Bhd, as well as its own transactions.
FGV said this in its reply to Bursa Malaysia's inquiries following the execution of a heads of agreement (HOA) among wholly-owned Felda Global Ventures Kalimantan Sdn Bhd (FGV Kalimantan), PT Rajawali Capital International and PT Rajawali Corpora.
It said it also took into consideration the current young crop profile (average mature age of eight years) of Eagle High which would complement FGV's older crop profile averaging 15.5 years and the earnings generative potential of Eagle High.
In justifying the exchange ratio of 0.0432494481, the group said it was the implied exchange ratio based on the number of new FGV ordinary shares to be issued in exchange for 2.206 billion Eagle High Sale Shares which was arrived at after taking into consideration the enterprise values of FGV and Eagle High.
FGV said the quantum of deposit (US$174.5 million) was a negotiated term by the concerned parties and the deposit will be fully refunded to FGV Kalimantan with all accrued interest if the proposed acquisitions do not materialise.
The quantum of the deposit was a commercial requirement from the vendors to demonstrate a high level of commitment from FGV, it added.
FGV said the funding for the proposed acquisitions would be via a combination of internal resources and external financing.
FGV, which was also enquired about the risks in relation to the transaction, answered that these would be mitigated by keeping abreast of the latest developments in the industry, adopting prudent investment strategies and cash flow management.
Of the vendors, it said PT Rajawali Corpora is 99.99 per cent owned by PT Danaswara Utama and the remainder by Peter Sondakh, which in turn owns 99.99 per cent of PT Rajawali Capital International.
Based on the terms of the HOA, the conditional sales and purchase agreements (CSPA) will be executed within 10 business days from the completion of due diligence on the companies no later than July 31, 2015.
As for the pro forma effect of the proposed acquisitions, the enlarged issued and paid-up share capital of FGV will be RM3.743 billion from RM3.648 billion as at Dec 31, 2014 and the proposed acquisitions are expected to contribute positively to future earnings of the group.
The group's gearing will increase from 0.7 times to 1.1 times (without the Land Lease Agreement or LLA) and from 1.5 times to 1.8 times (with the LLA).
In arriving at the amount, FGV said it considered, among others, palm oil plantation transactions undertaken since 2013 like the acquisition of New Britain Palm Oil Ltd (NBPOL) by Sime Darby in 2014 and of Unico-Desa Plantations Bhd by IOI Corporation Bhd, as well as its own transactions.
FGV said this in its reply to Bursa Malaysia's inquiries following the execution of a heads of agreement (HOA) among wholly-owned Felda Global Ventures Kalimantan Sdn Bhd (FGV Kalimantan), PT Rajawali Capital International and PT Rajawali Corpora.
It said it also took into consideration the current young crop profile (average mature age of eight years) of Eagle High which would complement FGV's older crop profile averaging 15.5 years and the earnings generative potential of Eagle High.
In justifying the exchange ratio of 0.0432494481, the group said it was the implied exchange ratio based on the number of new FGV ordinary shares to be issued in exchange for 2.206 billion Eagle High Sale Shares which was arrived at after taking into consideration the enterprise values of FGV and Eagle High.
FGV said the quantum of deposit (US$174.5 million) was a negotiated term by the concerned parties and the deposit will be fully refunded to FGV Kalimantan with all accrued interest if the proposed acquisitions do not materialise.
The quantum of the deposit was a commercial requirement from the vendors to demonstrate a high level of commitment from FGV, it added.
FGV said the funding for the proposed acquisitions would be via a combination of internal resources and external financing.
FGV, which was also enquired about the risks in relation to the transaction, answered that these would be mitigated by keeping abreast of the latest developments in the industry, adopting prudent investment strategies and cash flow management.
Of the vendors, it said PT Rajawali Corpora is 99.99 per cent owned by PT Danaswara Utama and the remainder by Peter Sondakh, which in turn owns 99.99 per cent of PT Rajawali Capital International.
Based on the terms of the HOA, the conditional sales and purchase agreements (CSPA) will be executed within 10 business days from the completion of due diligence on the companies no later than July 31, 2015.
As for the pro forma effect of the proposed acquisitions, the enlarged issued and paid-up share capital of FGV will be RM3.743 billion from RM3.648 billion as at Dec 31, 2014 and the proposed acquisitions are expected to contribute positively to future earnings of the group.
The group's gearing will increase from 0.7 times to 1.1 times (without the Land Lease Agreement or LLA) and from 1.5 times to 1.8 times (with the LLA).