Advertisement
Singapore markets closed
  • Straits Times Index

    3,224.01
    -27.70 (-0.85%)
     
  • Nikkei

    40,369.44
    +201.37 (+0.50%)
     
  • Hang Seng

    16,541.42
    +148.58 (+0.91%)
     
  • FTSE 100

    7,952.62
    +20.64 (+0.26%)
     
  • Bitcoin USD

    69,999.74
    -582.75 (-0.83%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • S&P 500

    5,254.35
    +5.86 (+0.11%)
     
  • Dow

    39,807.37
    +47.29 (+0.12%)
     
  • Nasdaq

    16,379.46
    -20.06 (-0.12%)
     
  • Gold

    2,254.80
    +16.40 (+0.73%)
     
  • Crude Oil

    83.11
    -0.06 (-0.07%)
     
  • 10-Yr Bond

    4.2060
    +0.0100 (+0.24%)
     
  • FTSE Bursa Malaysia

    1,536.07
    +5.47 (+0.36%)
     
  • Jakarta Composite Index

    7,288.81
    -21.28 (-0.29%)
     
  • PSE Index

    6,903.53
    +5.36 (+0.08%)
     

Felda defends Eagle High stake purchase, says not taking on too much debt

* Felda to buy 37 pct Eagle High stake from Rajawali for $680 mln

* Felda to rely mostly on debt to finance cash portion of deal

* Felda has been criticised for paying too much (Recasts and adds details of the deal)

By Al-Zaquan Amer Hamzah

KUALA LUMPUR, June 30 (Reuters) - Malaysia's Felda Global Ventures Holdings Bhd defended its planned $680 million purchase of a 37 percent stake in Indonesia's PT Eagle High Plantations, saying it was not overpaying and would not be taking on too much debt.

Shares in Felda, the world's third-largest palm plantation operator, have fallen 11 percent to trade near record lows since it announced the plan this month, with analysts and opposition lawmakers voicing concern that the proposed price was too high.

ADVERTISEMENT

Felda had said it planned to pay for 30 percent of Eagle High in cash but it was not clear how much of that would come from its cash pile and how much would come from borrowings. The other 7 percent will be paid in shares.

CEO Mohd Emir Mavani Abdullah told Reuters in an interview that the company would rely mostly on debt and would keep its cash reserves of 2.9 billion ringgit ($767 million) intact so it can keep paying dividends to shareholders.

"The cost of debt is cheap at the moment. If you're doing business you make sure you take it at the cheapest rate," he said.

The deal will raise Felda's debt-to-equity ratio from 0.72 times to 1.1 times if it relies solely on borrowings, but Emir said the level is reasonable for a growing company and would still be lower than its rivals.

Emir also took issue with analysts' assertions that the company was overpaying, saying that Felda was only paying the market value to acquire a large and fertile landbank of the type that it had been seeking without much success since its IPO three years ago.

"We cannot increase our landbank in Malaysia anymore. The geopolitics in Africa is very hard to manage," Emir said, adding that Felda had lost its bid for Papua New Guinea-based New Britain Palm Oil Ltd last October to domestic rival Sime Darby .

"We went looking again, it's not easy to find landbank that has 450,000 hectares for us," he said.

The deal to buy the stake from Indonesia's Rajawali Group has also been criticised in the media as politically motivated, with newspapers saying Felda was overly generous towards Rajawali CEO Peter Sondakh, who is perceived to be a close friend of Malaysian Prime Minister Najib Razak.

Emir said Felda had not been aware of Rajawali's political connections and that it had not been influenced by them. "This is a purely commercial deal. We don't want other factors to affect our decisions."

Rajawali did not immediately respond to a request for comment. It has said previously that it was approached by Felda and that of several suitors, it saw Felda as the company with which it had the most potential synergies.

($1 = 3.7800 ringgit) (Additional reporting by Eveline Danubrata in Jakarta; Editing by Edwina Gibbs)