KUALA LUMPUR (June 8): FGV Holdings Bhd’s wholly-owned unit FGV Integrated Farming Holdings Sdn Bhd (FGVIF) today signed an agreement to buy the entire 100% equity interest in MSM Perlis Sdn Bhd, which owns about 4,500 hectares in Chuping, Perlis for RM175 million.
MSM Perlis is a wholly-owned subsidiary of MSM Malaysia Holdings Bhd (MSM), which in turn is 51% owned by the FGV group.
The share sales agreement is in continuation to the binding term sheet previously signed between MSM and FGVIF on April 30, 2021.
“The disposal is following the discontinuation of non-strategic operations in MSM Perlis as part of MSM’s rationalisation strategies to streamline profitability and develop operational capability.
“MSM will be conducting an extraordinary general meeting (EGM) to obtain approval from its shareholders, which is scheduled by the third quarter of 2021 (3Q21). The transaction is targeted to complete before the end of the year,” FGV and MSM said in a joint statement today.
MSM group chief executive officer (CEO) Syed Feizal Syed Mohammad said extraordinary income would be realised as part of the proposed disposal, with an estimated gain of RM91.6 million.
“It is also to enhance our operational front, particularly on the utilisation factor and yield improvement in MSM Sugar Refinery (Johor) Sdn Bhd (MSM Johor).
“Aside from the disposal, the accelerated planned rectification works at MSM Johor will also support MSM’s target to reach a minimum UF (utilisation factor) rate of 50% by the third quarter of the year,” Syed Feizal said.
Meanwhile, FGV has earmarked the 11 parcels of agricultural and industrial land owned by MSM Perlis for the development of the FGV Chuping Agro Valley (FCAV) by FGVIF, a new sector under the group.
The development would consist of high-value integrated cash crop plantation activities, such as MD2 pineapples and harumanis mangoes, as well as dairy farming, it said.
The FGV group’s officer-in-charge and group divisional director of logistics and support businesses sector Azman Ahmad said the group is looking forward to the development and expansion of the FCAV project in order to realise FGVIF’s strategic initiatives.
“This is in line with the government’s proposition to bolster the domestic economic sector and provide employment opportunities in efforts to reduce the impact of the pandemic,” he said.
To date, the group has hired more than 50 employees and field workers for the project, and in addition, a total area of 60 hectares have been allocated for the agropreneur programme under the contract farming scheme for the MD2 pineapple project.
“The first batch of agropreneur recruitment is expected to be in July 2021.
“FGVIF has already commenced the ground work of 1,200 hectares of MD2 pineapple plantations, where we target to complete the development by 2025,” added Azman.
Since the cessation of its sugar cane plantations, MSM Perlis continued to manage the agricultural land with rubber, oil palm and mango plantations, but due to an unsustainable performance associated with high operating cost of maintaining the plantation activities, it ceased its plantation sector on June 30, 2019.
Meanwhile, MSM Perlis’ sugar refinery operations were discontinued a year later following MSM’s capacity rationalisation to consolidate the production in the new refinery, MSM Johor.
The unfavourable location of MSM Perlis (distance from ports), its small capacity and high-cost facility caused the operations to be uneconomical, the statement said.
