MARKET DEVELOPMENT
Felda's Eagle Deal Boon to CPOPC Plan
Felda's Eagle Deal Boon to CPOPC Plan
27/12/2016 (New Straits Times) - FELDA’S acquisition of a non-controlling 37 per cent stake in Indonesia’s PT Eagle High Plantation Tbk is strategically designed to allow Malaysia and Indonesia work closely towards establishing the Council of Palm Oil Producing Countries (CPOPC), said a source.
“The deal was by design as from the offset the idea was for Malaysia and Indonesia to work together, and hence the approval of both governments as they see this as a positive step in the realisation of CPOPC,” said the source.
Malaysia and Indonesia had agreed to establish the CPOPC during a meeting between Indonesian President Joko Widodo and Prime Minister Datuk Seri Najib Razak in Bogor, Indonesia, on October 11.
The two countries now account for 85 per cent of global palm oil output.
Other oil palm cultivating countries include Thailand, Papua New Guinea, Nigeria, Colombia and Liberia.
Felda on Friday inked a sale and purchase agreement with Rajawali Group to buy the stake in Jakarta-listed Eagle High, one of Indonesia’s largest palm oil companies, for US$505.4 million (RM2.26 billion).
The 37 per cent stake makes Felda the single largest Eagle High shareholder, but is insufficient to gain majority control.
However, the source said Felda would still have majority voting rights and board representation to protect its interest.
Meanwhile, Felda has refuted claims that the acquisition was overpriced, saying the accepted valuation method for plantation companies is enterprise value per hectare (ev/ha), and not share price.
The clarification comes following concerns that the group is overpaying by as much as 173 per cent premium over Eagle High share price for a non-controlling stake in it.
“The share price may not reflect true value of Eagle High. The accepted valuation is enterprise value per hectare, which is US$16,000 ev/ha, which is what Felda paid for the 37 per cent stake.
“This value compares favourably with recent transactions involving an Indonesian palm oil firm,” said Felda in a statement on Saturday.
It cited KL Kepong Bhd’s recent final offer of US$15,500 ev/ha for MP Evans Group that was rejected by the latter’s board as an independent valuation put its value at US$17,300 ev/ha.
“The MP Evans board has asked for valuation of US$24,000 ev/ha for the company. At US$505.4 million (RM2.26 billion), Felda is purchasing Eagle High stake at US$16,000 ev/ha.
“Felda also pointed that MP Evans’ planted land of 31,400ha was smaller than Eagle High’s 125,000ha. So, it is purchasing access to land four times the size of MP Evans at a lower ev/ha than MP Evans’ independent valuation. Also the concluded purchase by Sime Darby of New Britain Palm Oil Ltd was at an ev/ha of US$27,000,” it added.
Felda said the share price did not reflect true value because Eagle High shares were mainly controlled by Rajawali Group. Moreover, the company is listed on the Jakarta Stock Exchange, which is not as liquid as Bursa Malaysia or the Singapore Stock Exchange.
Hence, the purchase price took into account scarcity value of Eagle High.
“No other plantation of this large size is available for sale, especially at this valuation. This is the last opportunity for Felda/Malaysia or any other foreign parties to acquire an Indonesian company with massive landbank. The Indonesian government agreed to one-time exception to this deal,” Felda added.
The group said the deal would improve its crop profile as the average age of Eagle High’s trees is seven years versus Felda’s 15 years and there would be a lot of collaboration and cross-selling between the two entities.
Felda said there would be potential new businesses and synergies in seedling, fertiliser, crude palm oil trading and downstream/oleo-chemical.
The deal will also give access to vast Indonesian market of 260 million people for Felda group’s finished and consumer products.
“The deal was by design as from the offset the idea was for Malaysia and Indonesia to work together, and hence the approval of both governments as they see this as a positive step in the realisation of CPOPC,” said the source.
Malaysia and Indonesia had agreed to establish the CPOPC during a meeting between Indonesian President Joko Widodo and Prime Minister Datuk Seri Najib Razak in Bogor, Indonesia, on October 11.
The two countries now account for 85 per cent of global palm oil output.
Other oil palm cultivating countries include Thailand, Papua New Guinea, Nigeria, Colombia and Liberia.
Felda on Friday inked a sale and purchase agreement with Rajawali Group to buy the stake in Jakarta-listed Eagle High, one of Indonesia’s largest palm oil companies, for US$505.4 million (RM2.26 billion).
The 37 per cent stake makes Felda the single largest Eagle High shareholder, but is insufficient to gain majority control.
However, the source said Felda would still have majority voting rights and board representation to protect its interest.
Meanwhile, Felda has refuted claims that the acquisition was overpriced, saying the accepted valuation method for plantation companies is enterprise value per hectare (ev/ha), and not share price.
The clarification comes following concerns that the group is overpaying by as much as 173 per cent premium over Eagle High share price for a non-controlling stake in it.
“The share price may not reflect true value of Eagle High. The accepted valuation is enterprise value per hectare, which is US$16,000 ev/ha, which is what Felda paid for the 37 per cent stake.
“This value compares favourably with recent transactions involving an Indonesian palm oil firm,” said Felda in a statement on Saturday.
It cited KL Kepong Bhd’s recent final offer of US$15,500 ev/ha for MP Evans Group that was rejected by the latter’s board as an independent valuation put its value at US$17,300 ev/ha.
“The MP Evans board has asked for valuation of US$24,000 ev/ha for the company. At US$505.4 million (RM2.26 billion), Felda is purchasing Eagle High stake at US$16,000 ev/ha.
“Felda also pointed that MP Evans’ planted land of 31,400ha was smaller than Eagle High’s 125,000ha. So, it is purchasing access to land four times the size of MP Evans at a lower ev/ha than MP Evans’ independent valuation. Also the concluded purchase by Sime Darby of New Britain Palm Oil Ltd was at an ev/ha of US$27,000,” it added.
Felda said the share price did not reflect true value because Eagle High shares were mainly controlled by Rajawali Group. Moreover, the company is listed on the Jakarta Stock Exchange, which is not as liquid as Bursa Malaysia or the Singapore Stock Exchange.
Hence, the purchase price took into account scarcity value of Eagle High.
“No other plantation of this large size is available for sale, especially at this valuation. This is the last opportunity for Felda/Malaysia or any other foreign parties to acquire an Indonesian company with massive landbank. The Indonesian government agreed to one-time exception to this deal,” Felda added.
The group said the deal would improve its crop profile as the average age of Eagle High’s trees is seven years versus Felda’s 15 years and there would be a lot of collaboration and cross-selling between the two entities.
Felda said there would be potential new businesses and synergies in seedling, fertiliser, crude palm oil trading and downstream/oleo-chemical.
The deal will also give access to vast Indonesian market of 260 million people for Felda group’s finished and consumer products.