KUALA LUMPUR (May 11): Felda-owned FIC Properties Sdn Bhd (FICP) unit has exercised its put option to sell a 37% stake in loss-making PT Eagle High Plantation Tbk back to Rajawali Group .
The option involves either PT Rajawali Capital International or PT Rajawali Corpora to buy out the 37% stake in Eagle High which was sold to FICP for US$505.4 million (approximately RM2.2 billion), with a stake 6% per year from May 11, 2017 to the date of full payment.
The put option can be exercised from the fifth anniversary of the transaction.
In a statement, Felda said the FICP had exercised the put option “to fully safeguard its rights and interests.”
“Felda believes that FICP’s exercise of the put option today is a prudent business decision based on sound corporate governance principles. The decision is also one of the initiatives to establish a business model lighter and more durable for the Felda Group”, it said.
Ball in Rajawali’s court after a long wait
The ball now appears to be in Rajawali’s court to honor his obligations under Felda’s put option, which has been the subject of a dispute between the two parties since Felda’s attempt to exit the investment three years ago.
In April 2019, Economic Affairs Minister Datuk Seri Mohamed Azmin Ali told the Dewan Rakyat that RM1.58 billion, or 71% of the initial investment, had been compromised. By comparison, Eagle High had lost 87.24% of its market value to date compared to the price of acquiring Felda.
“There is no evidence to show that Felda’s board and management performed any due diligence or credit assessment for the year 2016 on the original owner of Eagle High to ensure its ability to repay Felda’s investment in the stake via the put option,” Mohamed Azmin told the Dewan Rakyat during Felda’s whitepaper filing.
Felda’s first attempt to exercise the put option in 2019 was “resisted” by Rajawali, Mohamed Azmin said, leading Felda to take the case to the Singapore International Arbitration Center.
In response, Rajawali chief executive Satrio Tjai told The Edge in April 2019 that the group had “more than enough capacity” to meet its obligations under the put option.
“If the put option is properly exercised, for example, to be exercised at Felda’s sole and absolute discretion on the fifth anniversary of the completion date – May 11, 2022 – Rajawali will honor its obligations,” he said. then explained.
Acquired at 96% premium
Felda bought the 37% stake in Eagle High shortly after its listed partner FGV Holdings Bhd canceled a plan to acquire the same block of shares at a price of $632 million.
Rajawali, which retains a majority stake in Eagle High, is controlled by tycoon Tan Sri Peter Sondakh, a known associate of former Malaysian Prime Minister Datuk Seri Najib Razak.
Critics at the time questioned the Felda acquisition, as the final price of US$505.4 million or 580 Indonesian rupees per share was then 95.86% above Eagle High’s market value .
Shares in the plantation group were trading at 74 Indonesian rupiahs at the time of writing.
In December 2016, Felda management justified to The Edge that the valuation used was US$16,000 enterprise value per hectare, which “compares favorably with recent deals involving Indonesian palm oil companies. “.
He also described it as “the last opportunity” to acquire an Indonesian plantation with a large land bank, and pointed to the average age of Eagle High’s trees of seven years compared to Felda’s 15 years at the time. .
However, the business failed to recover and bled for seven consecutive years. Despite high crude palm oil prices, it incurred a net loss of US$15.1 million on revenue of US$51.9 million in the first quarter ended March 31, 2022.