Malaysia Tycoon Seeks Stake in Major Palm Oil Producer, and Stock Jumps

(Bloomberg) -- Malaysian tycoon Syed Mokhtar Albukhary is seeking to combine his plantation assets with FGV Holdings Bhd. in a potential merger aimed at securing a stake in one of Malaysia’s biggest palm oil producers. FGV shares rallied.

Perspective Land (M) Sdn., owned by Syed Mokhtar, intends to “inject” its plantation assets into FGV, according to a filing from FGV late Thursday. The closely-held company would potentially become the single largest shareholder in the latter if the transaction comes to fruition, it said.

A merger could bolster FGV’s fortunes and challenge rival Sime Darby Plantations Bhd. position as the world’s top palm oil producer. Formerly called Felda Global Ventures Holdings Bhd., it was once a high-flying stock when it listed in 2012 following a $3.3 billion initial public offering.

FGV’s shares climbed as much as 7.5% to 1.15 ringgit, the most since July 20. It traded as high as 5.50 ringgit in July 2012. Some analysts said the proposal lacked details on how the merger would create value for shareholders.

“There are no solid numbers or materials issued,” Ivy Ng, head of research at CGS-CIMB Securities in Kuala Lumpur said Friday. She retained her hold recommendation on FGV and kept target price unchanged at 1.21 ringgit.

Plantations

A merger would see FGV owning about 473,000 acres of plantation assets, according to data from the companies’ websites. Sime Darby has 590,000 acres in comparison.

FGV under a new management had been selling off non-performing assets, cutting costs and boosting productivity at palm operations.

Syed Mokhtar’s offers comes weeks after the U.S has blocked imports of palm oil and related products from FGV on indications that that the company uses forced labor. FGV on Thursday said the U.S. authority found 11 indicators of forced labor in the company’s practices, without providing details. North America accounts for about 5% of FGV’s sales.

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