FGV, Pilgrims Fund Mull Up to $1 Billion Indonesia Sale

(Bloomberg) -- Palm oil giant FGV Holdings Bhd. and the Malaysian pilgrims fund are considering selling plantation assets in Indonesia as the government-linked entities seek to improve their financial position, people with knowledge of the matter said.

FGV and Lembaga Tabung Haji are working with an adviser to gauge potential buyer interest in Trurich Resources Sdn., which controls 42,000 hectares (103,800 acres) of oil palm estates in Kalimantan, according to the people. They may seek to value Trurich at as much as $1 billion including debt, the people said, asking not to be identified because the information is private.

Prime Minister Mahathir Mohamad has been seeking to clean up the balance sheets of state-backed companies after a global scandal erupted over the previous government’s stewardship of the 1MDB investment fund. Since coming to power in a surprise election win last year, he has pledged to improve transparency at Malaysia’s government-linked firms and apply more scrutiny to their business dealings as part of an anti-corruption drive.

Shares of FGV rose as much as 4.8 percent Wednesday, the biggest intraday gain in two weeks. They were up 3.2 percent at 10:57 a.m. in Kuala Lumpur, outpacing the 0.5 percent rise in the country’s benchmark index.

The deal would help Trurich’s owners offload assets that have been the subject of contention. Trurich said in December it filed a police report alleging that former senior management of the pilgrims fund misled the company into overpaying for Indonesia land purchases between 2008 and 2009. The executives haven’t publicly responded to the allegations.

FGV and the pilgrims fund haven’t made a final decision on whether to sell, and they may decide to keep the assets if they can’t fetch an attractive price, the people said. Representatives for FGV and Tabung Haji declined to comment, while Trurich didn’t answer calls to its office seeking comment.

The Malaysian finance ministry agreed in December to take over as much as 19.9 billion ringgit ($4.8 billion) of underperforming assets from Lembaga Tabung Haji, which helps Muslims save for a pilgrimage to Mecca. The rescue will help revive the fund’s balance sheet by offloading equity investments with significant unrealized losses.

FGV swung to a net loss of 208.8 million ringgit in the fourth quarter of last year, from a net income of 50.4 million ringgit a year earlier. The company has been focused on implementing new controls to bring its plantations’ performance in line with other large players in industry, Group Chief Executive Officer Haris Fadzilah Hassan said in February.

A number of plantations are coming up for sale amid forecasts that crude palm oil prices will recover later this year. Sime Darby Plantation Bhd. has been considering the sale of a stake in its Papua New Guinea unit, Bloomberg News reported last year, and is reviewing its Liberia operations. PT Triputra Agro Persada’s owners, including GIC Pte, are exploring a sale of the Indonesian palm oil producer, people familiar with the matter said in December.

To contact the reporter on this story: Elffie Chew in Kuala Lumpur at echew16@bloomberg.net

To contact the editors responsible for this story: Fion Li at fli59@bloomberg.net, Ben Scent, Timothy Sifert

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