It has been 2 weeks since our source spotted representatives from Indonesian Chinese tycoon Peter Sondakh’s Rajawali Group, representatives of PT GAMA Plantation, owned by another Indonesian Chinese tycoon, Martua Sitorus and representatives from a local Malay owned conglomerate at a meeting in a leading 5-star hotel in Kuala Lumpur.
Finally, we are able to confirm the deal that we at IPOM have been made aware of for the past 18 months.
The three parties are in talks for a take-over/restructuring of FGV. The announcement may be made before the Malaysian general elections on 9 May 2018. This will in no doubt be a strategic move by the ruling government to curry favour with Malaysians. FGV (was anticipated to be the bumiputera jewel), employs thousands of Malaysians whose support will be vital towards Barisan Nasional winning the elections. A move to help save FGV will ensure a positive spin on all things FGV, whose reputation and financials have taken a beating in recent years.
The two Chinese Indonesian businessmen are putting forward a proposal as one entity.
On the Malaysian front, the Malay owned conglomerate was represented by 3 senior personnel from Tradewinds. Tradewinds is owned by renowned Malay businessman, Tan Sri Syed Mokhtar Al-Bukhary. His private investment vehicle, Perspective Lane (M) Sdn Bhd has put in a proposal for FGV.
Both the Indonesian and Malaysian proposals have merit. However, which deal is better will depend on which side of the fence you are sitting on. A comparison of both proposals has been prepared by international investment bank, Deutsche Bank. It should be noted that Deutsche Bank was hired by Rajawali Corporation to evaluate both proposals.
We will look at the Indonesian proposal first.
The Indonesian deal involves a share-swap whereby FGV acquires GAMA and EHP shares in exchange for FGV shares. This will result in the injection of land from both parties into FGV thereby increasing FGV’s total landbank.
What IPOM has subsequently been made aware of is that the land to be injected by GAMA into FGV, is the very same land that was sold to GAMA by Tabung Haji almost 2 years ago. This land deal made the headlines for all the wrong reasons due to poor valuation and misappropriation of funds. The said land is now being injected back into FGV at a price that has been inflated by almost 200%. No justification has been provided for such a ridiculously inflated valuation in such a short time.
This is not the first time that FGV, or Felda for that matter has been at the wrong end of a deal involving Indonesians. Felda, via its special purpose vehicle FIC Properties Sdn Bhd had acquired 37% of the shares of Eagle High for approximately USD500 million, paying approximately IDR580 per share, at an extremely high premium of 95% to its closing share price at the point of acquisition. A year later, Felda’s investment is worth only one third of what it paid. The Eagle High deal drew a lot of criticism from industry experts due to the high premium that was paid.
IPOM has previously covered this here – How Malaysians lost RM1.2 billion in a year because of Felda
History will repeat itself if this deal goes through – Malaysians paying a high premium for worthless assets.
The man putting this deal together is Ali Abbas Alam, a 20-year investment banking veteran from Credit Suisse who specialises in debt financing for Indonesian borrowers, specifically those from the palm oil industry. He left his high-flying investment banking role to join Peter Sondakh’s Rajawali Corporation as its head of investment. His sole mandate is to see this deal accomplished for Eagle High.
IPOM has also previously broken the possibility of this deal as far back as July 2017.
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If this deal goes through, it will be the worst deal in agribusiness and in the Malaysian corporate scene. There is no basis or justification for this game of musical chairs with a piece of land.
It will also mark the end of the Malaysian ownership of Felda. Once Malaysia gives control of this jewel to the Indonesians, there is no turning back.
It will be a sad ending for Tun Razak’s legacy, which was once deemed one of the world’s most successful poverty eradication programmes.
One deal aims to further line the pockets of its already wealthy offerors and the other deal is genuinely looking to help turn Felda and FGV around to what it is meant to be – A Malaysian Treasure.