Felda ‘trapped’ as Rajawali seeks to prevent exit from EHP deal, says source

Indonesia’s Rajawali Group is locked in a battle with Felda which wants it to buy back shares in Eagle High Plantations. (Rajawali.com pic)

PETALING JAYA: Indonesia’s Rajawali Group, which sold 37% of its Eagle High Plantations TBK (EHP) to Felda, is attempting to walk away from fulfilling an option to buy back the shares, according to an individual familiar with the controversial deal which was the subject of a recent police report by Felda.

The source cited an ongoing arbitration between Rajawali Group and Felda, in which the group is seeking to stop Felda from exiting the deal.

As such, the source questioned Najib Razak’s argument that Felda could exercise the option to sell back the shares.

“Felda is trapped and cannot exit as claimed by Najib,” it said.

Under the put option, Rajawali – owned by Indonesian billionaire Peter Sondakh who is a friend of Najib – must refund to Felda the US$505 million (RM2.3 billion, according to Felda) for the purchase of the shares, plus 6% interest.

Felda lodged a police report on Monday, claiming that the deal had been forced on it by Najib and senior government leaders through a government loan.

In an immediate reaction, Najib defended the move, and argued that the deal was good because Felda had borrowed funds at 3.85% while Rajawali will pay interest at 6%.

He said Felda could always exit the purchase by exercising the put option to require Rajawali to buy back the shares and pay a 6% interest.

But the source rejected this argument, and also questioned the inflated amount paid for 37% of EHP.

Felda said that it paid over three times more than the actual value of US$114 million.

“There is no logic to Najib’s tweet and Facebook posting,” the source told FMT.

Referring to the arbitration process in Singapore, it said: “If it is so easy to exit from the EPH deal, Felda would have already done so.

“Najib knew that this could not be done as the arbitration is confidential. Najib was provoking Felda to breach this provision.”

Meanwhile, sources in the finance ministry said the put option was a ploy to make the EHP investment look like a normal investment when it was not.

Najib said the “put option” allows Felda to sell back its 37% to EHP at the original purchase price plus the 6% annual interest borne by EHP.

This, he said, meant that if EHP succeeded and the price of palm oil recovered, the investment would bring in huge profits.

Felda is now seeking capital injection from the government to stay afloat.

Yesterday, Bloomberg reported that it is seeking RM6 billion from the government to help turn itself around.

The request will be included in a white paper on the company expected to be tabled in Parliament today.