FGV may seek revised terms for US$680m Eagle High deal

KUALA LUMPUR: (Bloomberg) Felda Global Ventures Holdings Bhd (FGV), the world’s biggest crude palm oil (CPO) producer, is considering seeking revised terms for its US$680 million (or RM2.8 billion) deal to buy a stake in PT Eagle High Plantations, said people with knowledge of the matter. 

It might ask for a lower price to take into account issues discovered during due diligence on the Indonesian company, they said. The two companies reached a preliminary agreement in June and said they planned to announce a final pact by the middle of last month, a deadline that has since been extended to October 31. 

FGV said, on August 14, it had “substantially completed” due diligence and was in the process of negotiating the terms of the definitive documentation. FGV shares rose as much as 4.9 per cent before closing unchanged at RM1.22 yesterday. 

Eagle High dropped 1.2 per cent yesterday, the first decline in a week, compared with a 0.3 per cent slide in Jakarta’s benchmark gauge. It has lost 43 per cent since the initial deal was announced.

Since the start of the year, CPO prices have declined 13 per cent to current low level of RM2,000 per tonne. There are urgent concerns that slowing Chinese growth will hinder other emerging economies. 

Eagle High owns about 425,000ha, of which 152,000ha have been planted, according to a June filing to Jakarta stock exchange. 

FGV announced to Bursa Malaysia on June 12 it planned to buy 37 per cent of Eagle High from Indonesian conglomerate Rajawali Group for US$680 million in cash and shares. That implies an enterprise value of about US$17,400 per hectare, compared with the US$25,900 that Sime Darby Bhd paid for New Britain Palm Oil Ltd in March, said FGV chief executive officer Datuk Mohd Emir Mavani Abdullah in a July interview. 

The Employees Provident Fund, a substantial shareholder in FGV, is concerned about the valuation FGV was paying for a small stake in Eagle High, Bernama reported in June. 

FGV said in an emailed statement the deal was “still in process for the time being” and the final report on due diligence would be announced at the company’s upcoming shareholders meeting. 

Darjoto Setyawan, managing director of Rajawali Group, did not respond to an email and call. Eagle High corporate secretary Rudy Suhendra said he was not in a position to comment as the deal was being done by the parent company. 

FGV, which manages more than 450,000ha in Malaysia and Indonesia, has lost nearly three-quarters of its market value since its June 2012 initial public offering. Its second-quarter net income fell 70 per cent to RM46.1 million due to lower palm oil prices.