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Malaysia's Felda says to rely on debt to fund Eagle High stake purchase
[KUALA LUMPUR] Malaysia's Felda Global Ventures Holdings Bhd said it plans to rely mostly on debt to fund its $680 million purchase of a 37 per cent stake in Indonesia's PT Eagle High Plantations, adding that its debt-to-equity ratio would remain at a reasonable level.
"The cost of debt is cheap at the moment. If you're doing business you make sure you take it at the cheapest rate," CEO Mohd Emir Mavani Abdullah told Reuters in an interview.
Shares in Felda have fallen as much as 13 per cent to record lows after announcing the plan on June 12, with analysts and opposition lawmakers voicing concern that the proposed price was too high.
The world's third-largest palm plantation operator had said earlier it planned to pay for 30 per cent of Eagle High in cash and would issue new shares to acquire the other 7 per cent.
The deal will raise Felda's debt-to-equity ratio from 0.72 times to 1.1 times if it relies solely on borrowings, but Mr Emir said the level is reasonable for a growing company and still lower than its rivals.
Felda will keep its cash reserves of RM2.9 billion intact so it can keep paying dividends to shareholders, Emir added.