FGV share price shoots up after privatisation exercise fell through

KUALA LUMPUR (March 16): Investors snapped up shares in FGV Holdings Bhd after its privatisation exercise failed due to low acceptance of the takeover offer made by its controlling shareholder Federal Land Development Authority (FELDA) at RM1.30 per share.

FGV’s share price soared 25% shortly after the opening bell as the group had missed the rally that most of its plantation peers enjoyed over the past few months due to strong crude palm oil (CPO) prices.

At the time of writing, the stock had shot up 33 sen or 25.4% to RM1.63, with 41.24 million shares changing hands. The stock earlier climbed to an intraday high of RM1.67, a 28% jump from its previous close at RM1.30.

In contrast, FGV’s 51%-owned sugar refining company MSM Malaysia Holdings Bhd saw a reverse reaction as it fell 13 sen or 7.03% to RM1.72 from its previously close at RM1.85.

Yesterday, FGV said FELDA only obtained 81% equity interest in the plantation group as the offer closed at 5pm — out of the required 95% needed to trigger a compulsory share acquisition and take the listed company private.

FELDA’s takeover offer was at RM1.30 a share, which valued FGV at RM4.74 billion, a 71.43% discount to its 2012 initial public offering (IPO) price of RM4.55 per share.

This was deemed to be an unattractive offer price, especially against the strong CPO prices.

“We think that one of the factors that contributed to the unsuccessful attempt to take over FGV was the unattractive offer price of RM1.30. With current CPO prices breaching RM4,000 a tonne, also an all-time high, minority shareholders might have been seeking higher valuation,” MIDF Research wrote in a note today.

MIDF maintained its “neutral” call on the stock with an unchanged target price (TP) of RM1.31.

The offer, which was first announced on Dec 7, 2020 and turned unconditional on Dec 23, saw its deadline postponed three times from the original Feb 2 to March 15.

Following the unsuccessful attempt, FELDA will now have to address the minimum requirement of the public shareholding spread of FGV. Bursa Malaysia requires a public shareholding spread of 25% as opposed to 19% in FGV currently.

“Despite the unsuccessful attempt of the takeover of FGV by FELDA, going ahead, we anticipate that the group’s earnings will remain sanguine, boosted by favourable CPO prices with modest FFB production,” said MIDF.

On top of that, the anticipated higher average selling prices (ASPs) of refined sugar and an increase in sales volume should be able to help MSM to further increase its contribution to FGV in the coming quarters, MIDF added.

“Despite the US banning imports of palm oil from FGV over allegations of forced labour, we believe that the group’s outlook will remain resilient given that FGV will revisit the appointment of an independent audit firm for an audit of operations within a reasonable period of time, and continue to engage with the US Customs accordingly once an independent auditor has been appointed,” MIDF said.

Source: TheEdgeMarkets