Saturday, June 02, 2012

FGVH IPO: Government Should Handover 20% Stake to Felda Settlers' Cooperative

The federal land development scheme, FELDA’s chairman Tan Sri Isa Samad told a press conference yesterday that a 20 per cent stake in FGVH was already set aside under a “trust fund”. Hence the Felda settlers were not short-changed in the FGVH listing exercise which did not involve Koperasi Permodalan Felda (KPF).

KPF which is 70% owned by Felda settlers, with the balance owned by Felda employees, is the entity set up in 1980 to become a savings and investment trust for Felda members.  Its intent was to give a fair opportunity to Felda members to take part in equity ownership of companies set up by FELDA.

Tan Sri Isa even went on to claim that KPF had refused to participate in the listing of FGVH.  “We had reserved 37 per cent for KPF. But we still have a trust fund so 20 per cent of all profits will be given directly to the settlers as dividend,” he said at the launch of FGVH’s initial public offering (IPO) prospectus today.

That is a complete lie because KPF has expressed shock at their being left out of the initial public offering (IPO) exercise in its statement issued on 27 April 2012.  They had claimed that the decision to leave them in a lurch contradicts the Budget statement issued by the Prime Minister, Dato’ Seri Najib Razak which stated that the interest of the Felda settlers will be protected via the majority ownership of FGVH via KPF.  KPF has further stated in no uncertain terms that they had supported the Government’s intent to list FGVH.

Hence under such circumstances where KPF has been a willing participant, why should the government set up a new mysterious “trust fund” when it could just park the shares whose beneficiaries are the Felda settlers, under KPF?

The fact that the listing prospectus of FGVH made absolutely no mention of the existence of such a “trust fund” only serves to deepen suspicions over the real intent of the Government.  The “trust fund” idea appears to be an afterthought expressed to placate the settlers who are clearly at the losing end of the Felda restructuring and FGVH listing exercise.

I had highlighted yesterday that FGVH will be cannibalizing the income and earnings of KPF as 355,864 hectares of plantation land previously managed by KPF subsidiaries is transferred into the hands of FGVH, to boost FGVH profits by RM680 million annually (based on 2011 performance).

Hence the exclusion of KPF from any participation in FGVH after KPF’s future earnings have been significantly cannibalized by the latter proves that the Government isn’t sincere about prioritizing and protect the interest of the Felda settlers.

The Prime Minister, Dato’ Seri Najib Razak was also clearly attempting to mislead the settlers by claiming that Felda settlers “will definitely get priority in the listing of FGVH when over 70% of the retail shares offered for public listing are allocated for the settlers, Felda staff and individuals who have contributed to the organization”, as reported by Bernama.  The Prime Minister’s assurance is disingenuous because only 12.5% of the offer shares are reserved for retail investors.  Therefore in real terms, only 9.2% of the shares offered are reserved for the above group of people to purchase.

And in fact, after listing, should the entire allocation of shares be fully subscribed, the said group of settlers, Felda employees and other contributing individuals will hold only meager 3.68% of the enlarged share capital!

It is not too late for the Government to honour its pledges to the Felda settlers.  The Prime Minister and Felda Chairman must immediately announce that 20% of the Government’s stake in FGVH post-listing will be transferred directly to KPF, as the sole body entrusted to protect the savings and investment interests of the Felda settlers and its employees.  If the Government choose to persist with the hare-brained “trust fund” idea, then it is clear that the Government intends only to take the settlers for a ride.
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