FGV Holdings Bhd, via subsidiary FGV Integrated Farming Holdings Sdn Bhd, has inked a share sales agreement with MSM Malaysia Holdings Bhd to buy MSM Perlis Sdn Bhd for RM175 million.
The agreement is a continuation of the binding term sheet signed between MSM and FGV Integrated on April 30 this year.
MSM, which is 51 percent-owned by FGV, will obtain shareholders’ approval via an extraordinary general meeting by the third quarter of 2021.
The transaction was expected to be completed before the end of the year," FGV and MSM said in a joint statement today.
MSM group chief executive officer Syed Feizal Syed Mohammad said the disposal of MSM Perlis was part of the group's blueprint in monetizing non-core assets to strengthen and improve its financial performance.
Syed Feizal said an extraordinary income with an estimated gain of RM91.6 million would be realized as part of the disposal.
"It is also to enhance our operational front, particularly on utilization 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 utilization rate of 50 per cent by the third quarter of 2021," he said.
Recently, MSM Johor completed its boiler rectification work and resumed its sugar production and packing.
The temporary closure was to allow planned rectification works and targeting higher operational reliability and stocks availability.
FGV group officer in charge and divisional director of logistic and support businesses sector Azman Ahmad said it was looking forward to developing and expanding the FGV Chuping Agro Valley project to realize FGV Integrated'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," said Azman.
To date, more than 50 employees and field workers have been hired for the project.
In addition, a total area of 60 hectares has been allocated for the agropreneurs programme under the contract farming scheme for the MD2 Pineapple project.
The first batch of agropreneurs' recruitment is expected to be in July 2021.
"FGV Integrated has already commenced the groundwork of 1,200 hectares of MD2 pineapple plantation where we target to complete the development by the year 2025," said Azman.
Since the cessation of sugar cane plantation in 2011, MSM Perlis managed agricultural land with rubber, oil palm and mango plantations.
However, due to unsustainable performance associated with high operating costs of maintaining plantation activities, MSM Perlis ceased its plantation sector activities on June 30, 2019.
MSM Perlis' sugar refinery operations were discontinued a year later following MSM's capacity rationalization to consolidate the production in the new refinery, MSM Johor.
These decisions were mandated by both boards of directors of FGV and MSM in the companies' best interest to optimize the potential of the assets and strengthen the capital structure.
As public-listed companies, stakeholders will continue to be engaged, and both companies will make timely disclosures.
Guided by its business plans and strategies, FGV and MSM will remain resilient in sustaining the turnaround journey and building on emerging opportunities.