| KUALA LUMPUR
KUALA LUMPUR Dec 27 Malaysia's Federal Land
Development Authority (Felda) came under mounting criticism on
Tuesday for its plans to purchase a stake in Indonesian palm oil
firm PT Eagle High Plantations Tbk in what critics
have called an overpriced deal.
State-owned Felda, which operates some of the world's
biggest palm oil plantations, said on Friday it plans to buy a
37 percent stake in Eagle High for $505.4 million.
Based on Reuters calculations, that puts the deal's value at
about 582 rupiah (4 cents) a share, a 95 percent premium to
Eagle High's Friday closing price.
Criticism from opposition parties and Felda settlers, or
small landowners, was swift.
One settlers' association, the National Felda Settlers'
Children Society (ANAK), asked the government to intervene and
stop Felda's purchase of the Eagle High stake.
"I'm confident it's not just among ANAK members. A majority
or a large number of the Felda community are upset (with the
deal)," said ANAK president Mazlan Aliman.
He expressed concern that Felda may have to borrow to
finance the stake acquisition, which could affect the settlers,
who typically receive some grants from Felda.
Felda settlers are ethnic Malays who receive aid in the form
of land from the government. They form a bulk of the vote base
in about 50 of 222 parliamentary seats.
Najib, mired in a corruption scandal involving state fund
1MDB, is eyeing elections in the second half of 2017, nearly a
year ahead of the 2018 deadline, a government source has told
Mazlan said he was worried the deal was made "expensive" for
a "personal agenda" and that the association would organise
protest rallies if the deal was not called off.
Rajawali Group, which owns a controlling stake in Eagle
High, is one of Indonesia's biggest conglomerates, with
companies involved in media, telecommunications, mining and
plantations. It is headed by tycoon Peter Sondakh, who has
long-standing ties with Malaysian Prime Minister Najib Razak.
Felda's main listed unit, Felda Global Ventures Holdings Bhd
(FGV), first tried to buy a stake in Eagle High in
June 2015 for $680 million, but scrapped that plan in November
after politicians and investors blasted the deal as too
One reason Felda Group is trying to do the deal through one
of its unlisted entities is so it can bypass shareholder
approval, sources familiar with the matter said.
"If (Najib) pushes this, he picks a fight not with political
parties but with UMNO's largest vote bank," opposition lawmaker
Rafizi Ramli told a news conference on Tuesday, referring to the
ruling United Malays National Organisation.
Rafizi said he was confident the deal would be stopped again
and that he would work with Indonesian legislators on this.
Nazir Razak, the brother of the Malaysian prime minister and
chairman of the country's second biggest bank, CIMB Group
Holdings Bhd, also questioned the deal.
"Eagle High's average price in November was 212 rupiah per
share, so a 173 percent premium for a noncontrol stake," Nazir
said in an Instagram post on Friday. "I hope the board will
fully justify the acquisition & valuation even though the deal
is no longer made by listed FGV (Felda Global Ventures)."
Felda, in a statement addressing the criticism, said the
share price was not the accepted valuation method when it comes
to a plantation company and that it should instead be determined
by enterprise value per hectare.
Palm oil industry analysts say while this is a justifiable
metric for a complete takeover or a controlling stake, it is not
justified for minority stakes.
"Felda will not be in the drivers seat, so this is only an
investment for them. From an investment perspective, share price
is very much relevant," said an industry analyst, who did not
want to be identified.
In the statement, Felda also said the deal will not impact
its existing commitments and programs to improve the well-being
of the settlers.
(Additional reporting by Rozanna Latiff and Liz Lee; Writing by
A. Ananthalakshmi. Editing by Bill Tarrant.)