| KUALA LUMPUR
KUALA LUMPUR May 31 Malaysian Prime Minister
Najib Razak will unveil on Thursday the $3 billion listing of
palm oil giant Felda Global, paving the way for Asia's largest
initial public offering so far this year that could also lift
his chances of winning a national election.
The 58-year-old leader will release the prospectus for the
IPO of Felda Global Ventures Holdings (FGVH) at an event in the
capital Kuala Lumpur that will be as much political theatre as a
The world's largest IPO this year after Facebook has already
attracted a strong cast of cornerstone investors including
French agribusiness giant Louis Dreyfus, Fidelity Investments
and Middle Eastern sovereign fund Qatar Holding LLC.
That partly reflects strong investor interest in Southeast
Asia, which has seen a burst of IPOs since the start of the year
despite the protracted euro zone debt crisis, the debacle over
Facebook's market debut and shaky IPO markets elsewhere in Asia.
The strong support from cornerstones, which are taking up
about two-thirds of the IPO shares, and from Malaysian states in
which the plantations are located, means the deal is unlikely to
suffer the same fate as the social networking giant or the
flurry of Hong Kong share sales that have been shelved recently.
There is also significant political capital invested in the
sale, which is set to deliver a windfall totalling more than
$500 million to tens of thousands of farmers in what is likely
to be an election year.
"So far, there has not been a single major IPO being pulled
in Malaysia last year and this year," said Alan Tan, fund
manager for Asian equities at Lion Global Investors in
Singapore. "Felda is also government-owned, so the chance of it
being successfully listed is quite high."
London luxury jeweller Graff Diamonds is the latest company
to pull its planned $1 billion Hong Kong offering, the fourth
major IPO to be called off in Asia in a week as stock markets
MAJOR NEW PLAYER
Felda Global, which should have a market capitalisation of
around 17 billion ringgit ($5.4 billion), aims to become a major
new player in global commodities and plans to use the IPO
proceeds to expand in Southeast Asia and Africa.
It is targeting up to $3.4 billion from the IPO based on a
price range of 4 to 4.65 ringgit.
The government's Federal Land Development Authority (FELDA),
the parent firm of FGVH, has more than 880,000 hectares (2.2
million acres) of plantation. That puts it among the world's
largest producers of the palm oil that is used in everyday
products from soap to cooking oil and which has tripled in price
in the past decade.
The listing of FGVH clubs together refineries, plantation
management companies and logistics firms as Malaysia looks to
build an agribusiness to rival Singapore's Wilmar International
For the about 1 million FELDA farmers and family members, or
settlers as they are known, the IPO is the latest step in a
remarkable transformation over a few decades from landless poor
to landholders and now shareholders in a global conglomerate.
Najib's father, former Prime Minister Abdul Razak, started
FELDA in the 1950s, handing out land to Malays to fight poverty
and giving them a crucial role in making Malaysia the world's
second-largest palm oil producer.
"The listing marks a new era and is a step forward from my
father's dream," Najib told a gathering of about 10,000 farmers
this month at an oil palm estate in his home state of Pahang.
The farmers hold the key to a likely electoral dividend for
Najib, whose ruling coalition faces a tough battle against a
resurgent opposition in a national election that the prime
minister must call by next March but which is expected sooner.
About a fifth of the proceeds from selling 2.19 billion
shares will be handed out to 112,635 landholders, giving them a
combined windfall of $553 million or nearly $5,000 each. That is
more than the annual minimum salary, adding to the economic
feel-good factor that Najib and his ruling UMNO party are trying
generate ahead of the polls through a series of social handouts.
The FELDA settlers form the bulk of the vote in 52 of
Malaysia's 222 parliamentary seats, including Najib's base in
Pahang state, and they are ethnic Malays - a core support group
that has been drifting away from the National Front coalition.
"Najib is trying to ensure that the opposition doesn't make
inroads into the rural sector," said Khor Yu Leng, an
independent analyst who studies the agriculture sector.
But she said the glow could wear off for the farmers in the
coming years as they lose some of the benefits of government
patronage and become more tied to global markets.
Sources told Reuters that FGVH has started offering its IPO
shares to indigenous "bumiputras" at an indicative price of 4.65
ringgit per share.
Bankers involved in the deal say the final retail price that
Najib will announce on Thursday is 4.55 ringgit per share or a 2
percent discount to the institutional price to be determined,
whichever is lower.
Bumiputra, meaning "sons of the soil" in the Malay language,
refers to the majority ethnic Malays and other indigenous people
who benefit from the decades-old affirmative action policy that
favours them in housing, education and business.
Analysts have said Felda Global's aging palm oil trees,
which need replanting, could be a drag on its future earnings
and profitability. About 53 percent of the company's 323,587 ha
of plantations estates in Malaysia are more than 21 years old,
according to its draft prospectus filed on April 27.
In contrast, close to 72 percent of Indonesian plantation
firm Bumitama Agri Ltd's 119,162 ha of planted area
are made up of immature and young trees.
(Additional reporting by Yantoultra Ngui in Kuala Lumpur and
Eveline Danubrata and Saeed Azhar in Singapore; Editing by Alex