It is final. FGV has acquired the whole of Pontian United Plantations for RM1.204 billion and the vendor is paid cash. It is the largest plantations acquisition that was realised for cash in the country.
Business Times story on the acquisition;
FGV acquires Pontian United for RM1.2bPublished: 2013/10/01
KUALA LUMPUR: Felda Global Ventures Holdings Bhd (FGV) has successfully secured acceptances to acquire a 100 per cent equity in Pontian United Plantations Bhd as part of plans to expand its plantation landbank.
The total cash consideration for the acquisition amounted to RM1.204 billion.
President and Chief Executive Officer Mohd Emir Mavani Abdullah said the acquisition would increase the company’s crude palm oil (CPO) production by about 80,000 metric tonnes per annum.
“The group will also benefit from the synergies derived from the operations of both Pontian and FGV’s estates in Sabah,” he said in a statement to Bursa Malaysia today.
Through its associate Felda Holdings Bhd, FGV is currently the largest CPO producer in the world, producing some 3.3 million metric tonnes in 2012.
Pontian’s plantation land is fully planted and located primarily in the Kinabatangan and Lahad Datu regions in Sabah.
Its land is also within the proximity of Felda Sahabat estates and FGV Group’s refinery in Lahad Datu, which will create synergy and improve the efficiency of operations.
Pontian’s integrated operations also include an palm oil processing mill and a kernel crushing facility.
In addition, it owns plantation land in Kukup, Johor which is strategically located due to its proximity to the Tuas second link between Johor and Singapore.
As at Dec 31, 2012, Pontian had a healthy balance sheet with a total of RM256 million in cash and cash equivalents, as well as being debt free.
FGV chairman Tan Sri Mohd Isa Abdul Samad said the deal would increase the group’s brownfield plantation in Malaysia and positively contribute to its bottomline as well as benefit the group and all Felda settlers.
FGV launched a voluntary conditional takeover offer for all Pontian shares at RM140 each on July 18 this year.
The buyout had been subject to the condition that it received acceptances of more than 50 per cent of Pontian shares.
The offer price had subsequently been adjusted to RM139.20 per share due to Pontian’s payment of interim dividend of 80 sen per share on Sept 2, 2013.
As at the final closing date today, FGV received valid acceptances for a total of 8,648,280 Pontian shares representing 100 per cent of the issued and paid-up capital of Pontian. — Bernama
FGV CEO Emir Mavani rationalised the acquisition that it is complementary to their core business.
However, there are too many interesting points to highlight if not ponder. For starters, why would FGV want to pay almost RM140 per share when the interim earning is only 80sen. It means the shareholders get money from within before getting lots more money from outside.
That is bordering very close to absurdity.
The next one is, if Pontian Plantations is a cash rich company, why haven’t they been declaring and paying out dividends. It is to a point of major discontent of the many minority shareholders against the controlling shareholders. They had a lot of cash and neither expanded nor pay out dividends.
The third point, no one has ever talked about Pontian Plantations’ own expansion program even before the FGV take over. Even when one of their own shareholders TSH Resources wanted to take over and announced it 15 months ago.
The Star report on TSH Resources director Dato’ Kelvin Tan of their bid to take control of Pontian Plantations:
Thursday June 28, 2012
TSH proposes merger with Pontian United Plantations
BY WONG WEI-SHEN
Chairman says move will ignite synergistic growth
In filings with Bursa Malaysia on June 26, TSH announced a proposed acquisition of PUPB’s entire voting shares of RM1 each via its indirect wholly-owned subsidiary, Bisa Jaya Sdn Bhd (BJSB), together with Chin Leong Thye Sdn Bhd, Lee Chin Hwa, Lee Min Huat and Lee Sep Pian.
“Our intention for the merger is to create more value. We can have better economies of scale and can benefit from creating value together,” chairman Datuk Kelvin Tan told reporters yesterday.
Both TSH and PUPB plantation fields have been neighbours since the 1990s, sharing the same access road in Lahad Datu, Sabah.
Tan said the benefits of the merger included economies of scale in both companies’ supply chains, logistics, distributions, finance and employee training.
Most of PUPB’s plantations have matured, while 73% of TSH’s plantations are immature. Furthermore, TSH has a landbank size of 70,000 ha for future planting. “PUPB can ride on the growth that we will have,” Tan said.
PUPB would also be able to reap benefits from TSH’s biotech Wakuba high-yield clone, a technology developed by TSH’s biotech centre in Sabah. The Wakuba ramets can produce around eight to 10 tonnes per hectare of palm oil yield, compared with the current industry average of four to six tonnes.
The merger will allow both TSH and PUPB to increase planted plantation landbank size and eventually lead to a higher fresh fruit bunch output.
To enable the integration of both companies, TSH needs to obtain a 50% plus one share stake in PUPB. Currently, TSH and the joint offerors hold 1.71 million shares in PUPB, representing a 19.72% stake. Through BJSB, TSH has been a shareholder of PUPB since 2005.
TSH is offering RM90 for each PUPB share, which will come in two segments. The first of which will be satisfied through RM45.06 in cash and RM44.94 via the issuance of 21 TSH shares. This offer price is 2.25 times the last known transacted price six months ago of PUPB at RM40.
The issuance of TSH shares represents the ordinary shares of 50 sen each, issued at a price of RM2.14 per TSH share, a 10% discount to the five-day volume weighted average market price of TSH shares up to and including June 25.
The remaining 80% stake in PUPB not already owned by TSH and the joint offerors, via the offer was valued at RM624mil. This was at least 14.6 times the price earnings ratio, based on the past three-year net profit average. The 100% valuation of the company currently stands at RM780mil. TSH expects to deliver the offer document to PUPB in three weeks.
However, PUPB will continue to operate as a separate legal entity following the merger.
Hence, the fourth point is that the business plan of Pontian Plantations beyond its existing operations operations is ambiguous. That would relate to what would the worth of the company, especially when the average trees are 13 years old.
The fifth point is very interesting. How come the controlling shareholders refused to sell away Pontian Plantations to one of their own?
One can’t help it but to conclude the acquisition of Pontian Plantations is more about providing the opportunity of the existing shareholders to cash out and walk away with literally a mountain of cash. What is interesting about this is that some of these shareholders as DAP diehards, which include Former DAP founding member and Chairman and now Life Adviser Dr Chen Man Hin.
FGV simply put a lot of cash into the hands of Dr Chen’s and his band of anti-constitution cohorts. In short, FGV just funded DAP.
No two ways about arguing that the DAP has no linkages to the banned Communist Party of Malaysia. The DAP leaders public argument and participation in the recent bereavement of the CPM Secretary General Chin “Butcher of Malaya” Peng is a clear demonstration.
Now comes the “Thirteen Million Plus Ringgit” questions:
- How and why did FGV agreed to acquisition of Pontian Plantations?
- Was there proper corporate governance exercise in this deal?
- Were there strict due diligence investigations?
- Which investment bank was facilitating all these processes?
- Which legal firm was vetting through all the documents?
- Were the external auditors consulted?
A decision to acquire a very substantial of asset of 16,000ha for RM1.204 billion paid in cash must be a very strategic decision. It is very interesting how FGV Chairman Tan Sri Isa Samad manipulated and convinced the BoD of FGV to go for it, without issuing notice and call for convening an EGM and get the full shareholders’ mandate to the proposal.
Adding to that point, as an UMNO MP and aspiring UMNO Vice President in the ongoing party election process FGV Chairman Isa should be wary about the exercise is about providing opportunity for DAP leaders like Dr Chen to cash out with cash, instead of leveraging with other capital instruments. It is a serious matter pf perception for the party.
It is time that some of the FGV minority shareholders stand up and be heard. It is their money which is being spent.
This easily open up the suspicion that there is something hanky panky going around with this very expensive acquisition. It can’t be helped that some persons are making personal gains from this deal.
This is definitely an activity for MACC to do their usual probing. At the very least, did the process of getting FGV BoD approval for such a huge deal realised for cash is ‘halal’.