Felda’s strategic move for FGV control

IN what seems to be a tactical move, the Federal Land Development Authority (Felda) relaunched its bid this week to take FGV Holdings Bhd private – five years after the first one. This offer is being made at the same price as the earlier offer, at RM1.30 a share.

The playing field, however, seems to have changed. Felda now has new allies, including the Pahang government which rejected the offer five years ago.

In the first attempt, Felda only obtained 81.9% equity interest in FGV, up from the 33.66% it held when making the 2020 general offer (GO).

Today, with Pahang’s 5% stake and persons acting in concert, Felda now collectively holds 86.93% of FGV’s total issued shares.

Going by the Securities Commission’s Malaysian Code on Take-overs and Mergers, Felda needs 90% of the shares it did not own at the point of making the offer, before it can compulsorily acquire the balance and delist FGV.

This would mean it would need to own an absolute total of 98.7% (based on the balance of 13.07% shares it does not own).

Then there is Bursa Malaysia’s Listing Requirements (LR) which stipulate that listed companies with a free float of less than 10% of shares could be suspended. Felda is 3.07% short of that 90% threshold.

FGV’s public shareholding spread falls far short of the 25% minimum requirement. The plantation group failed to meet this requirement and instead requested many extensions.

It was granted seven extensions but its last application in March was rejected, which gave it six months to rectify it. The deadline for that is Sept 10.

Could the minority shareholders holding out for a higher price now be worried about the suspension of FGV’s shares if Felda hits the 90% threshold?

It is understood that many minority shareholders are still holding on to their shares, hoping that the buyout price will at least match or come closer to the latter’s net tangible asset per share of RM1.67.

Recall that FGV listed on Bursa Malaysia in June 2012 at RM4.55 per share.

Private investor Ian Yoong says the timing of Felda’s renewed offer is strategic, coinciding with regulatory deadlines.

“However, it sets a bad precedent as many listed companies, whose share prices are trading at steep discounts to fair valuation, can be privatised.

“There is little minority shareholders can do,” Yoong adds.

Some reckon that minority shareholders could still block the deal if they unite, but mobilising such collective action may prove challenging.

Among the remaining minority shareholders of FGV is the Sabah government, which owns 1.81% via the Chief Minister of Sabah.

Another Sabah-linked entity, Ekuiti Yakinjaya Sdn Bhd, which is controlled by Sabah Development Bhd, has 0.572%. Yayasan Islam Terengganu holds 0.45%.

If these state entities accept the offer, it could push Felda closer to the 90% threshold.

Observers believe that once this threshold is within reach or crossed, other minority shareholders may be more inclined to accept the offer or sell in the open market, especially as FGV’s share price inched up to RM1.30 from RM1.28 earlier this week.

FGV’s offer document states that Bursa Securities may, at its discretion, impose additional conditions for the withdrawal of FGV’s listing status.

In response to StarBiz 7 queries, Bursa Securities says it adopts a balanced and proportionate regulatory framework for suspension and delisting to safeguard shareholders’ interests.

“The terms of the GO – such as the fair and reasonableness of the offer price, acceptance threshold, maintenance of listing status, suspension notice, etc – are clearly outlined in the offer documents and related announcements, which are publicly available via Bursa Malaysia’s website.”

The regulator says to date, it has applied the LR provision consistently with no precedent where trading suspension was delayed once the applicable threshold and conditions were satisfied.

“The delisting, however, is a separate process and it is dependent on the listed issuer submitting the delisting application to Bursa Securities after all requisite conditions under the LR are fulfilled,” says Bursa Securities.

It clarifies that the compliance of public shareholding spread and the privatisation or GO exercise are two distinct regulatory matters.

“For context, FGV has not been in compliance with the minimum public share spread since March 15, 2021, and was granted time extensions over four years to regularise its shortfall. During this period, the trading of its securities was never suspended and shareholders have remained well aware of the company’s situations or public spread status.

“The recent bid to privatise FGV is a corporate action initiated within the power by FGV’s major shareholder, whereby the duties and rights of both the offeror and offeree including their minorities’ rights are governed by the rules under the Malaysian Code of Take-overs and Mergers.”

According to the regulator, the rules require, among other things, the appointment of an independent adviser who can advise shareholders on whether the privatisation or GO proposal and exit offer are fair and reasonable, and whether they should vote for the offer or reject it.

“There is no circumstance where the minority is bound by the majority decision, unlike in an AGM or EGM. Even when an offeree rejects the offer, his position and rights as a shareholder remain intact under the Companies Act 2016 and are not affected by the outcome of the GO,” adds Bursa Securities.

In Singapore, shares of Great Eastern Holdings have been suspended since July 2024 after the counter’s free float fell below 10% following a takeover bid by its majority shareholder OCBC. The bank has been trying to take the insurance company private since 2004.

During Great Eastern’s AGM last month, shareholders raised concerns about its free float and whether the Singapore Exchange might compel OCBC to make a mandatory offer to the remaining shareholders, similar to Boustead Projects Ltd previously.

In the Boustead Projects case, Singapore’s front-line regulator had directed its major shareholder to make an exit offer to minorities that was “fair and reasonable”. Ultimately, the final price was revised and it represented a 24% premium over the earlier offer.

Latest media reports indicate that OCBC has made “significant progress” and will update shareholders by June 8.

Regarding FGV, it had earlier proposed a bonus issue of Islamic redeemable preference shares in order to comply with the public shareholding spread requirement. Felda, however, did not receive government approval.

The government agency does not intend to maintain the listing status of FGV.

Felda’s full ownership may enable it to streamline operational decision-making, accelerate turnaround efforts, and better align FGV’s upstream and downstream activities.

Research firms have advised minorities to accept the latest offer.

However, FGV has vast landbank in states like Johor, where land demand is rising due to the data centre boom. This makes FGV’s true worth higher, some contend.