Update Felda said to scrap US$680m Eagle High deal; Eagle High stock dives

by **Cals** Tue 01 Dec 2015, 00:34

Update

[size=28]Felda said to scrap US$680m Eagle High deal; Eagle High stock dives

By Reuters / Reuters | November 30, 2015 : 4:35 PM MYT

KUALA LUMPUR (Nov 30): Malaysia's Felda Global Ventures Holdings Bhd ([You must be registered and logged in to see this image.] Valuation: 0.80, Fundamental: 1.15) will scrap a current plan to buy a stake in Indonesia's PT Eagle High Plantations for US$680 million, after the deal was criticised as too expensive and market conditions deteriorated, sources directly involved with the matter said.

Shares in Eagle High fell as much as 9.6% on the news.

Felda, the world's No.3 palm plantation operator, unveiled a plan in June to buy 30% of Indonesia's Eagle High in cash and an additional 7% by issuing new shares - in what was set to be its biggest acquisition so far to expand its landbank.

"The previous arrangement didn't make sense anymore," said one of the sources, adding that both parties had gone back to the drawing board to work on new terms.

These could include a lower sale price, a bigger landbank being sold or Felda taking more control of Eagle High, the source said.

Felda had to extend deadlines for the deal with privately owned Rajawali Group, one of Indonesia's largest conglomerates, after shareholders, which include state-linked funds, questioned the potential premium of 54% to 82%.

The sources added that a sharp drop in the ringgit and depressed palm oil prices meant the deal was no longer acceptable to Felda.

The sources, who declined to be identified as the news has not been formally disclosed, said the two companies will announce on Monday that they propose to restructure the deal. But they will give no details on how and when this is likely to be done, the sources said.

A spokeswoman for Felda declined to comment.

The planned transaction would have been mostly funded by debt, which prompted analysts to cut their ratings and price targets for Felda.

"The cancellation of the deal is an upside for the company as this was expected to be near-term earnings dilutive," said Marvin Khor, an analyst at AllianceDBS Research.

Felda's shares fell to record lows in August but have since regained some ground. On Monday, they were trading down 4%.

Felda had agreed to buy shares in Eagle High between 678 rupiah to 800 rupiah per share, Rajawali officials said in June, when Eagle High was trading around 440 rupiah per share.

Felda initially defended the deal, saying it was only paying the market value to acquire a desired large and fertile landbank, something it had been pursuing unsuccessfully since it raised US$3 billion in an IPO three years ago.

Felda lost a bid for Papua New Guinea-based New Britain Palm Oil Ltd last October to domestic rival Sime Darby ([You must be registered and logged in to see this image.]Valuation: 1.40, Fundamental: 0.80).

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