Gutsy FGV shareholders get rewarded as Felda fails in takeover bid

IN a cynical way, the failure of the Federal Land Development Authority (Felda) to take FGV Holdings Bhd private at RM1.30/share is testament of the triumph of the latter’s minority shareholders who have faith in the management to turnaround the agri-business conglomerate.

Notwithstanding the legacy issues of sorts that is synonymous with FGV, there is a greater allure for the investing fraternity right now – crude palm oil (CPO) price that has surpassed the RM4,000 mark in recent times.

Felda’s failure has been greeted ‘with vengeance’ by investors with FGV’s share price rallying almost 30% to a 52-week high of RM1.67. At 11.27am, FGV was up 33 sen or 25.38% at RM1.63 with 43.88 million shares traded, thus valuing the company at RM5.95 bil.

Felda which was required to obtain 90% of the shares it did not own from the acceptance of its takeover offer of FGV has only managed to obtain 81% of the total issued shares (excluding treasury shares) based on FGV’s Bursa Malaysia filing dated March 15 (yesterday).

To re-cap, the group has extended the closing date for the acceptance of the takeover offer to March 15. The original deadline was on Feb 2 which was then postponed to Feb 16 and subsequently to March 2.

Through Maybank Investment Bhd, Felda has made an unconditional mandatory takeover offer to acquire all remaining shares in FGV at RM1.30/share.

MIDF Research attributed Felda’s failure to wrest control of FGV to the former’s unattractive offer price of RM1.30.

“With the current CPO price having breached RM4,000 a tonne which is also at an all-time high, minority shareholders might have been seeking for a higher valuation,” commented the research house.

Nevertheless, MIDF Research maintained both its “neutral” rating and FGV’s target price of RM1.31 despite anticipation of the group’s earnings remaining sanguine boosted by a favourable CPO price with a modest fresh fruit bunch (FFB) production.

“Despite the US banning imports of palm oil from FGV over allegations of forced labour, we believe that the group’s outlook will remain resilient given it will revisit the appointment of an independent audit firm for an audit of operations within a reasonable period of time and will continue to engage with the CBP (the US Customs and Border Protection) accordingly once an independent auditor has been appointed,” added the research house. – March 16, 2021

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