The listing of FELDA Global Ventures

It is quite difficult to understand the issues surrounding the listing of Felda Global Ventures (FGV) but it is important to do so because it involves the livelihood of thousands of Malaysians and their future. I do not have a lot of information but I thought I would lay out some pertinent issues and facts (as far as I can glean from news reports).

1. The listing involves the sale of FELDA Investment Co-operative (KPF)’s 51% stake (note, controlling stake) in FELDA Holdings Bhd to FGV (see “FELDA forms SPV” for details). Another Malaysian Insider report (”Settlers have no cash”) says:

FGVH subsidiaries such as FELDA Iffco Sdn Bhd, FELDA Global Technologies, FELDA Global Ventures Middle East and FELDA Global Ventures Arabia are reported to have chalked up accumulated losses of around RM500 million up to last year.

The profitable FELDA Holdings has a workforce of some 19,000 employees, with a labour force of 46,795 workers at 300 estates, 70 palm oil mills, seven refineries, four kernel-crushing plants, 13 rubber factories, manufacturing plants and several logistic and bulking installations spread throughout Malaysia and several locations overseas.

The government has said the move will result in a RM5.9 billion lump sum payment to settlers but the National FELDA Settlers’ Children’s Association (ANAK) has insisted it will not be in cash but shares in FGVH.

2. According to a deputy minister, Datuk Ahmad Maslan, in 2009 FELDA has RM1.35 billion cash and RM15.37 billion in assets. He however admitted that from 2004 to 2009 the cash total had fallen by RM 2.73 billion but assets had risen RM6.2 billion. (“Tan insists FELDA in trouble”). You can read the article to know what Datuk Dr Tan Kee Kwong had to say about this.

3. FELDA (the government authority) has decided to form a “special purpose vehicle” (SPV) to take a majority stake in FGV (FELDA forms SPV) after some settlers successfully blocked KPF from injecting its assets into FGV (the original listing scheme).

“Because of the action by these eight people, KPF members cannot take part in the proposed listing of the one of the biggest palm oil producers in the world,” Isa said in a statement issued this evening.

“Although the action by this group of FELDA settlers has no impact on the FGVH listing, we are disappointed at the decision influenced by the opposition that has blocked an opportunity for a majority of FELDA employees to be involved in FGVH’s growth,” he added.

Last week, a group of settlers won today a temporary court order blocking the transfer of shares from their co-operative to FGVH, a crucial step in Putrajaya’s plans to list the plantation firm.

4. From the “FELDA forms SPV” article, we are told:

FGVH is now a holding company that has signed a long-term land lease agreement with Putrajaya for 350,000ha of federal government-owned plantation land. It also owns additional land, holds other forms of business such as downstream subsidiaries and associates, as well as a controlling stake in the public-listed MSM Sugar and a 49 per cent stake in FHB.

The main businesses of FHB are oil-palm milling operations, and various palm oil related logistics and downstream businesses, as well as non-palm related businesses such as rubber, cocoa, information technology and security services.

Many questions arise and to be honest, I have found very few answers. That alone makes me suspicious.

1. There is FELDA (the government authority) and there is KPF (the cooperative). What is FGV? What has it to do with FELDA and the mission and objectives of FELDA (apart from bearing the name FELDA)? Who funds FGV? What are their liabilities? Who owns and controls it? What individuals will gain from the listing of FGV?

2. When KPF’s stake in FELDA Holdings Bhd are injected into FGV, how will the interests of the smallholder be safeguarded when FELDA Asset Holdings Co, a new investment holding company formed to control and manage KPF’s 37% in FGV, will have representatives from the PM’s department, the Finance Ministry, FELDA, FGV, and KPF, all of whom are to be appointed by Datuk Seri Najib?

3. FELDA Holdings Bhd has assets and cash in billions. It has a successful track record. KPF has a controlling 51% stake in it. Why must the listing be done via FGV, a loss-making entity? What does KPF gain by going down this road?

4. Assuming that the listing of FGV is ultimately intended to benefit the smallholder, why has the government decided, within a week, to power ahead with the listing using a SPV instead of explaining, discussing and allaying the fears of the smallholders? Why have they not reached out to the smallholders with more information and even concession? Why the haste to list? Surely an injunction granted by a judge is not to pander to frivolous fears? Or should I assume that the interests of the smallholder is not at the heart of this listing exercise?

Tengku Razaleigh Hamzah said the original listing would expose land belonging to 200,000 smallholders to the open market.

TDM said that the smallholders themselves cannot afford to buy shares and expand the company.

Unnamed critics say the move short-changes more than 200,000 smallholders and saddles FELDA with an annual deficit of RM1.5 billion.

Datuk Ahmad Mazlan, the deputy minister, said that FELDA had billions of ringgit in cash and assets in 2009.

Tan Sri Isa Samad (former Chief Minister of Negri Sembilan and present chairman of FELDA) said that (blocking KPJ) will have no impact on the FGV listing but the majority of FELDA employees will not be able to be involved in the growth of FGV (but yes, they are going ahead with the listing).

What do you say?

References

Settlers have no cash
http://www.themalaysianinsider.com/malaysia/article/dr-m-settlers-have-no-cash-to-expand-felda/

FELDA forms SPV
http://www.themalaysianinsider.com/malaysia/article/felda-forms-unit-to-invest-in-fgvh-replacing-kpf/

Tan insists Felda in trouble
http://www.themalaysianinsider.com/malaysia/article/tan-insists-felda-in-trouble-calls-umno-man-an-idiot/

This blog article has a good overview of the issues, quoting several news report verbatim.
http://malaysiafinance.blogspot.com/2012/02/why-felda-global-ventures-is-so.html

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