Felda achieves US$3.3bn in IPO

Shares in Malaysian palm oil giant, Felda Global Ventures Holdings Bhd, surged as high as 20% on the day of its initial public offering (IPO) on 28 June, Reuters reports.
The firm successfully raised US$3.3bn in the world’s largest IPO after Facebook. Shares traded as high as 5.46 ringgit (US$1.70), a 20% premium to the IPO reference price of 4.55 ringgit (US$1.40), despite a 36% drop in Felda’s first quarter 2012 profits to US$70M.
Chief executive Sabri Ahmad, said in an interview with the Wall Street Journal that the group would see slightly flat revenue growth of 1-2% in the next few years due to its massive replanting efforts.
He said the group had set aside some US$800M for replanting, and planned to cut down about 14,800ha/year of old oil palm trees until 2015. Felda Global has some 355,000ha of land, mostly planted with oil palm. “Productivity will only jump after the third year when the company completes its replanting,” Ahmad said.
The IPO has come ahead of Malaysian general elections, but it faced resistance from ethnic Malay farmers who feared they would not receive their fair share of benefits.
Some 20,000 farmers grouped under the Felda Investment Cooperative owned 51% of Felda Holdings, while Felda Global Venture Holdings held the remaining 49%. Under the listing, farmers swapped their stake in Felda Holdings for a 61% stake in Felda Global.
Critics had warned that farmers could lose out because Felda Global’s international subsidiaries had reportedly accumulated losses running into the millions, while  Felda Holdings is highly profitable.
Farmers have each been given nearly US$5,000 in windfall payments, generated from a fifth of the IPO proceeds.
The IPO attracted key institutional investors, including Qatar Holding LCC – a unit of the Gulf nation’s sovereign wealth fund ¬– and French agribusiness giant Louis Dreyfus. However, Louis Dreyfus ended up with just a 0.5% portion of the IPO, after it was promised 2.5%.
Felda Global said it planned to use most of the IPO proceeds to buy more plantations in Southeast Asia and Africa, and expand its refining operations.
Felda Global is an arm of the Federal Land Development Authority, a Malaysian government agency set up to resettle the rural poor and help them grow cash crops. Felda is the world’s largest plantation operator, with more than 800,000ha of land.

From Print Issue: July 2012