Felda Global Ventures Holdings Bhd (FGVH), which spent RM1.2 billion to acquire Pontian Plantations United Bhd recently, announced another major acquisition — splurging RM2.2 billion to buy 51% of Felda Holdings Bhd (FHB), making it a wholly owned subsidiary.
In a filing exchange last Friday, FGVH said it will use money from its IPO proceeds and bank borrowings to fund the acquisition of the oil palm plantation company.
FGVH said it wanted to make FHB a 100% subsidiary to “enable FGVH to have complete control of the entire plantation value chain and to attain operational efficiency, as well as to achieve synergies within the plantation value chain of the FGVH group of companies”.
“The acquisition will also align the management and equity interest of the midstream and downstream activities,” said FGVH.
The value of the purchase would severely deplete FGVH’s coffer for future upstream acquisition if the purchase combination involves more use of the IPO proceeds while more borrowings will change the gearing ratio of the company.
FGVH has about RM2.6 billion left from its IPO proceeds after paying RM1.2 billion to acquire 100% shares in Pontian Plantations United.
FHB is the world’s largest producer of crude palm oil (CPO) by value, accounting for 8% of the world’s CPO production.
For its financial year ended Dec 31, 2012, FHB recorded a profit after tax of RM484.2 million on a turnover of more than RM18 billion.
The seller for the 112.2 million shares at RM19.61 per share is Koperasi Permodalan Felda Malaysia Bhd (KPF), a cooperative whose members are mostly settlers in Federal Land Development Authority (Felda) schemes.
FGVH said although both parties have agreed to the deal, both delegates of KPF and shareholders of FGVH must approve the deal at their respective EGMs, on a date yet to be announced. Nonetheless, it expects the proposed acquisition to be completed by the end of 2013.