FIVE non-interested FGV Holdings Bhd directors have recommended to shareholders of the company to reject the RM1.30/share offer by the Federal Land Development Authority (FELDA) on various grounds.
This, however, runs contrary to the opinion of RHB Investment Bank – the independent adviser for the offer – which has deemed the offer as “not fair but reasonable”.
Datuk Yusli Mohamed Yusoff, Datuk Mohd Anwar Yahya, Datin Hoi Lai Ping, Dr Mohamed Nazeeb P. Alithambi and Dr Nesadurai Kalanithi said their recommendation is made after careful examination of the terms and conditions of the offer and the rationale for the offer and future plans for FGV Group and its employees as disclosed in the offer document.
Below are their reasoning:
- The offer price is “not fair”as it is below the fair value by RHB Investment Bank ranging from RM1.42 to RM1.60 per FGV share or 8.5% to 18.8% below the fair value per FGV share;
- The management of FGV had since 2019 implemented a transformation programme (ie Business Plan 2019-2021) focusing on operational improvements and strengthening the governance and accountability in line with FGV’s status as a public listed company;
- Keeping FGV as a public listed company will ensure the transparency and timely disclosures of FGVas one of the largest plantation companies in the world in terms of crude palm oil production with over three million metric tonne produced in 2019 (about 15.5% of Malaysia’s production and 4.1% of world’s production), and a company of significant public interest and impact on corporate world of Malaysia; and
- At initial public offering (IPO) price of RM4.55 per FGV share and now being offered to be acquired at RM1.30 per FGV share, and having taken into consideration the significant improvement on the quality of plantation assets of FGV since its IPO, the non-interested directors are unable to recommend the offer as “reasonable” to FGV minority shareholders which also include settlers and employees of Felda and FGV respectively.
Elaborating on improvements made on the quality of plantation assets, FGV said they cover improvements to the average age profile from 16.25 years in 2012 to 13.77 years in 2019 through aggressive replanting efforts (incurring about RM5.3 bil since 2012 to cover replanting costs), improvements on housing for workers, and fertiliser costs as well as increased landbank size since IPO from 382,603 hectares to 439,230 hectares in 2019 (excluding landbank held under joint venture and associates).
RHB Investment Bank has substantiated its view with the following rationale:
- FGV has not received any alternative proposals for the offer shares (including any offer to acquire the assets and liabilities of FGV Group);
- Felda and persons acting in concert with it have a collective shareholding of 54.09% (as of Jan 15) which provides them control over matters and are able to determine the outcome of resolutions sought at general meetings of FGV; and
- Felda does not intend to maintain the listing status of FGV and should Felda be successful, the holders will not be able to trade the securities of FGV on the Main Market of Bursa Malaysia. Moreover, should Felda accumulate a higher shareholding level as a result of valid acceptances and/or further acquisitions, the liquidity of FGV sshares may be constrained.
All-in, FGV shareholders have until 5pm on Feb 2 (Tuesday) to accept Felda’s offer unless it is revised or extended in accordance with the Rules on Take-Overs, Mergers and Compulsory Acquisitions issued by the Securities Commission.
At 2.47pm, FGV was unchanged at RM1.30 with 3.23 million shares traded, thus valuing the company at RM4.74 bil. – Jan 22, 2021
