Shares of PT Eagle High Plantation (BWPT) TBk collapsed 9.62% on Monday (Nov 30) on broad market sentiment and uncertainties surrounding the proposed acquisition by Malaysian giant Felda Global Ventures Holdings Berhad.
Felda Global’s shares also down, but slightly by 1.12% on KLSE, while peers listed on IDX lost ground. Astra Agro Lestari (AALI), for example, dropped 6.22%, while London Sumatra Plantation (LSIP) declined by 5.14%.
Sampoerna Agro, Golden Plantation, Salim Ivomas, and Sawit Sumbermas also lost ground in Jakarta, while Sime Darby fell 1.74% in Kuala Lumpur. Wilmar International and Bumitama Agri also ended lower ground in Singapore, while First Resources and Golden Agri-Resources gained by 2% and 1.41% respectively.
But, it was an announcement from Felda Global that makes the headlines. After extending several times closing of the proposed acquisition, Felda informed Bursa Malaysia on Monday that “Felda and the vendors (Rajawali Group) are currently in discussion for a possible different mode of investment in Eagle High. In this regards, the parties agreed that the deadline to enter into the CSPAs will no longer be applicable.”
Felda Global had in June agreed to pay Rp888 per share of BWPT (US$631.5 million at Rp13300 per share for 9.457 billion shares). At the moment, BWPT shares are traded at Rp235, way below the price offered by Felda Global. Felda entered the deal when crude palm oil (CPO) was traded around US$680 per ton in Rotterdam (CIF). In the past three months, however, CPO has been hovering below US$600/ton, being US$565/ton last week.
Felda acquires 37% shares in BWPT for US$680 million (Rp9.32 trillion) or about Rp60 million per hectares of landbank (US$4386). Felda purchased 11.66 billion shares (37% of BWPT issued shares) from Rajawali Corpora. In a joint statement, BWPT said Felda Global acquired 37% shares in BWPT plus 95% shares in sugar plantation owned by Rajawali Group for cash consideration and stock deal. “The 37% shares in BWPT is worth US$680 million, consisted of cash and share ownership in Felda Global,” said BWPT.
Rajawali Capital would get US$631.5 million in cash for 9.457 billion BWPT shares, while the balance of 2.2 billion shares will be paid with the issuance of 95.44 million new Felda Global shares.
Weak performance of BWPT in the past few quarters might have triggered Felda Global to ask for revision of acquisition consideration. In the third quarter, BWPT’s sales revenue grew only by 10.7%, while gross profit and operating profit dropped 15% and 79% respectively. Worse, BWPT posted net loss of Rp94 billion in the quarter, against profit of Rp36 billion in the corresponding quarter of 2014.
Investors and bankers have earlier criticised Felda Global for the expensive acquisition. Like other plantation companies, Felda Global suffered 69% fall in net profit for six months ended June 30, 2015 to RMB132.7 million only.
BWPT has rights to a total area of approximately 419,000 hectares of land and plantations in Kalimantan, Sulawesi, Papua and Sumatra provinces in Indonesia. Planted areas, however, are said below 200,000 hectares. Felda Global, however, will only control 37% shares in BWPT, giving it indirect control over 155,030 hectares of land bank and less than 60,000 hectares of planted area.
What kind of new mode of investment from Felda in BWPT?
Looks like that Felda finds difficult to justify the proposed acquisition because even at Rp40 million per hectare (US$2900), some small holders find difficult to get buyers this time around. The price tag used to be over Rp120 million per hectare, but during normal period it was around Rp70-80 million per hectare. “Some offer for Rp40 million per hectare in South Sumatra, but nobody is interested to buy,” said one businessman in the plantation sector.
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