Saying EHP was a major player in Indonesia, the source pointed out at least three major ways in which the deal will benefit Malaysia.
One, it has available a huge land bank, two, it will improve Felda’s crop profile as the average age of EHP’s trees is seven years compared with Felda’s 15 years, and three, there will be much collaboration and cross selling between Felda and EHP.
It is also part of Felda’s plan to increase its trading operations and develop new markets.
It has been reported that Felda, through its subsidiary, FIC Properties Sdn Bhd, has signed a sales and purchase agreement with the Rajawali Group for the acquisition of EHP for US$505.4 million (RM2.26 billion) in cash and shares.
The price is much lower that the US$680 million in cash and Felda shares negotiated earlier.
Felda had, on Dec 23, said: “The US$505.4 million acquisition will mean that Felda will, among others, have access to more than 320,000ha of land bank in Indonesia (about 4.4 times the size of Singapore), including more than 125,000ha of planted nucleus.”
The source said the deal was a stand-alone investment with its own financing and would not impact Felda’s existing commitments and programmes to improve the well-being of the settlers.
On criticism that the price was high, the source said the share price might not reflect the true value of EHP.
“The accepted valuation is enterprise value per hectare which is US$16,000 ev/ha which is what Felda paid for the 37% stake. This value compares favourably with recent transactions involving an Indonesian palm oil company.”
The source added that the purchase price also took into account the scarcity value of EHP. No other plantation of this large size is available for sale, especially at this valuation and this is the last opportunity for Felda or Malaysia or any other foreign party to acquire an Indonesian company with a massive land bank.
The Indonesian government agreed to a one-time exception to this deal.
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