No synergy seen in Felda’s Eagle High buy

KUALA LUMPUR (Dec 29): More questions are being raised on the rationale for the purchase of a 37% non-controlling stake by Federal Land Development Authority (Felda) in Indonesia’s PT Eagle High Plantations Tbk as there would be no unlocking of value for Felda. In fact, the US$505.4 million or RM2.26 billion ($732.4 million) investment should be spent on Felda’s locally listed arm Felda Global Ventures Holdings (FGV).

“Felda is not acquiring a controlling stake in Eagle High [and] it cannot effect a mandatory general offer. As a result, Felda cannot derive synergy from the buy unlike Sime Darby Bhd’s acquisition of New Britain Palm Oil Ltd (NBPOL). “Since there is no asset [but] only a stake, Felda cannot unlock the value from this exercise,” an analyst with a local bank, who declined to be quoted, said.

The analyst added that the acquisition at US$505.4 million by Felda’s FIC Properties Sdn Bhd (FICP), which is more than double the average share price of Eagle High, is a significant premium and therefore “too pricey” for a loss-making company.

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