FGV back in for NBPOL

This is written by my colleague Zaidi Isham Ismail.

KUALA LUMPUR: FELDA Global Ventures Holdings Bhd (FGV) has initiated talks with Kulim (M) Bhd to buy the latter’s stake in London-listed New Britain Palm Oil Ltd (NBPOL), said people familiar with the matter.

FGV has emerged as the next preferred candidate for the 48.97 per cent stake, which could cost up to RM5 billion, after Sime Darby Bhd turned down the chance to acquire it. FGV had previously submitted its bid in June.


“Yes, they are in the running now that Sime Darby has pulled out. Yes, they are in talks,” a source told Business Times yesterday.

The source did not elaborate but said the FGV management has issued a gag order over the matter. When asked whether FGV is concerned about buying the stake without management control, the source said: “They have calculated the risk.”

Top FGV officials declined to comment.

Sime Darby, arguably the world’s largest oil palm planter by land size, announced on Tuesday it had opted against buying the stake but no reasons were given. 

Its 60-day exclusivity period to finalise the deal ended four days ago. If this deal was successful, it would have allowed Malaysia’s oldest conglomerate to expand its planted area by 15 per cent to 607,218ha.

Meanwhile, analysts think the inability to exert control over NBPOL is the key stumbling block for Sime Darby. They noted that it would be pointless to spend RM5 billion on the stake if management ontrol was not in Sime Darby’s hands.

“We think that the failure in taking a leading role in NBPOL despite being a major shareholder could be the major stumbling block for Sime Darby,” said Public Investment Bank Bhd in its notes to investors, yesterday.

HwangDBS Research also said the key to enhancing NBPOL’s earnings was for Sime Darby to assume full operational and management control.

CIMB Equities Research said the decision might be negative for Kulim, which would probably need to settle for a lower price for NBPOL.

AmSecurities noted that at the current price of £4.175 (RM22.14) per share, NBPOL was trading at a price-to-earnings ratio of 16 times the consensus earnings per share (EPS) for financial year 2014. “At a premium of between 30 and 50 per cent over the current price (£5.40-£6.30/share), NBPOL would be valued at between 21 and 24 times its financial year 2014 forecast EPS. 

"That is on the steep side and would have translated into a purchase price of between RM4.3 billion and RM5 billion for Sime Darby to assume full control of NBPOL.”