In its independent advice circular released today, the bank – which was appointed as the independent adviser relating to the takeover – concluded the offer is “not fair but reasonable”.
“Kenanga IB is of the view the offer is not fair as the offer price represents a discount between 28.96% and 34.67% to the estimated value of FGV shares of between RM1.83 and RM1.99 derived from using the sum-of-parts valuation method,” it said.
However, the offer is reasonable as it reflects a premium to recent market prices and provides shareholders an “exit opportunity to realise their investments” given that FGV shares are relatively illiquid.
Other key reasons Kenanga cited for recommending shareholders accept the offer include the fact that Felda currently holds 87.53%, giving it control over shareholder decisions, and it does not plan to maintain FGV’s listing status.
It also highlighted the stock’s low trading liquidity with monthly trading volume at just 1.47%, much lower than the FBM KLCI average of 5.89%, making it harder for minority shareholders to sell.
The circular stated that FGV’s non-interested directors agreed with Kenanga’s view and also recommended that shareholders accept the offer, which remains open until July 7.
Felda, along with parties acting in concert (PACs), launched its takeover offer on May 26, marking its second attempt to privatise FGV following a previous offer in 2020.
The earlier offer, also at RM1.30 per share, failed to attain the 90% shareholder acceptance threshold for a mandatory compulsory acquisition.
Felda’s wholly-owned subsidiary, Felda Asset Holdings Company Sdn Bhd, is taking the lead in the current bid, together with the Pahang government.
Other PACs include Koperasi Kakitangan Felda Malaysia Bhd — whose board consists of Felda management, as well as Sulong Jamil Shariff and his wife Salina Samsudin.
At the time of writing, the shares were trading at RM1.31, giving FGV a market capitalisation of RM4.74 billion. Year to date, the stock is up 17%.
The current share price is a far cry from when FGV was listed on Bursa Malaysia 13 years ago to great fanfare. The initial public offering (IPO) raised about RM10.5 billion, giving it a market capitalisation in excess of RM16 billion.
It was hailed as the world’s second-largest IPO that year after Facebook when FGV was listed in June 2012. It traded as high as RM5.46 on its debut, a 20% premium to its IPO price of RM4.55.
Felda was established in 1956 to develop rural land and reduce poverty through resettlement schemes.