December 26, 2011
FGV (Felda Global Ventures) listing: Corporate vs. Peasant Settler – Sakmongkol 47
Two upcoming events are waited upon with great anticipation: (1) The outcome of an injunction application by a few settlers to stop the FELDA FGV listing and (2) the January 5 EGM of Koperasi Permodalan FELDA (KPF).
The outcome of the second event is a foregone conclusion. Chairman Isa will get elected as the KPF chairman despite not having the qualifications to become an office bearer. He is not a settler nor is he a FELDA employee. But the Minister in Charge of FELDA has given his approval, what can people do? The Minister is also the Prime Minister. He lords over whoever lives in this land. We must not be sidetracked by this sideshow involving the two bit actor Isa Samad. The more pressing matter concerns the listing exercise.
Why the Injunction?
Why the injunction? Why should 4 people extend energy and time and assume the risks of being called traitors and all that, want to apply an injunction? Greed can’t be the overriding objective? If it is, it’s more profitable for the 4 people to side with Chairman Isa who can be generous as he is pleased.
The object of the injunction is to stop FGV taking over assets and shares belonging to KPF in FELDA Holdings. These people believed that 350,000 hectares of land which FELDA took was actually meant for settlers.
All the assets owned by KPF in FELDA Holdings will be leased to FGV for the next 99 years. They will no longer exercise control over the assets as their interests are all converted into shares. FELDA Holdings is 51% owned by settlers and 49% owned by FELDA Global.
They are willing to risk it all, because they believe settlers are being sold out. This listing is the ultimate shortchanging of settlers. The first occurred when FELDA withheld more than 300,000 hectares of land from being given to settlers. By assuming ownership of the land, FELDA was able to become a planter itself.
So we have the peasant settler and the corporate settler. The corporate settlers have moved on to becoming fabulously rich while the peasant settler (Tun Razak’s regimented landless and jobless) have remained relatively behind. They get to enjoy the trickle down effects defined and determined by FELDA which practically runs the business on behalf and for the benefit of settlers.
The corporate settler sells CPO and busies itself in a wide range of downstream manufacturing and marketing activities. They were even able to go into various businesses out of the capital created from ownership of the land which is supposed to go to the landless and jobless. The second took place, when FELDA listed its sugar refining business. It made over RM 800 million out of that IPO.
How much did KPF make by virtue of owning 20% of the business? On paper it made RM300 million? How did Sabri Ahmad (left) cull this figure? If KPF makes a paper gain of RM300 million and the RM 300m is 20%, then the whole gain is RM1.5 billion. But Sabri says, FELDA made RM 800 million. Maybe it’s just a figure of speech- the point is, he wanted to say KPF made money albeit on paper. Does that raise the share value of KPF in FELDA Holdings now that it made RM300 million paper gain?
If the injunction is successful, the proposed listing of FELDA Global will be delayed. The listing will see the merger of FELDA Holdings with FELDA Global. The smaller partner in terms of equity, FELDA Global is buying out KPF which has 51%. How is the nature of the transaction? Does it involve and offer by FGV to buy out KPF at a certain price or will it involve just a share swap? You priced it with premium fella- that’s why KPF is getting 61%.
But the share price of the new listed entity is also at a premium. You can easily inflate the price of the would be listed entity, paint glossy pictures, introduce exotic phrase such as unlocking value and so forth- you will probably induce KPF representatives to believe they are getting a good deal. KPF will get 61%. That’s good you say. Isa Samad goes around berating ungrateful settlers- “apa lagi awak semua mahu- dari 51% jadi 61%?”
But we ask in return- 61% of how much? If 30% of the shares are sold to the public, the settlers end up with 61% of 70% of the business. That’s not all. 30% is held by the public- the interests of settlers are converted into shares which are tradeable in the market place. As with the track record of bumiputera held equities, you can bet that chances are, the shares will be sold. If that happens, the bumiputra equity portion in the listed entity will be lost for short term gain.
Source of Peasant Settler Dissatisfaction
The peasant settler gets MRSM colleges, indoor stadiums, futsal stadiums and other social amenities but the value of these pales in comparison with the amenities and wealth enhancing resources obtained by the corporate settler.The corporate settler has moved on into oleo chemicals, downstream activities, hotels, sugar business etc. Why can’t the peasant settler be organized that same way?
The fundamental reason why this listing is vehemently opposed is that people concerned believe it’s a sellout and it’s the culmination of unconscionable acts by FELDA.