Louis Dreyfus Scales Back Felda Global Investment
06/22/2012| 01:45am US/Eastern
KUALA LUMPUR--Global commodities trader Louis Dreyfus has sharply cut its proposed investment in Malaysia's Felda Global Ventures Holdings Bhd.'s $3.1 billion initial public offering, two people familiar with the matter said Friday.
However, analysts said this doesn't signal dimming investor interest in the little known state-run plantation company that has closed the world's second-largest IPO to date this year after Facebook's $16 billion deal.
Louis Dreyfus had earlier said it would take a 2.5% stake in the plantation firm as a "strategic investor." However, it now has just 0.5%, the people said.
The decision to scale back stems from a delay in finalizing a pact to establish a trading and marketing joint venture with Felda, one of the people said.
"I don't think it (Louis Dreyfus' decision) will affect Felda Global's appeal to investors as this may just be an exception," said Danny Wong, chief executive officer of Areca Capital Sdn., which manages MYR500 million worth of local assets and bid for Felda shares.
The institutional portion of Felda's IPO drew bids for more than 30 times the available shares. The company priced the offering at MYR4.55 a share, near the top of its price guidance of MYR4.00-MYR4.65.
This heavy demand came even as worries about the euro-zone debt crisis soured investor sentiment in other deals. Declines in Facebook's stock have added to wariness about IPOs. U.K.-based jeweler Graff Diamond Corp. last month scrapped its US$1 billion IPO in Hong Kong because of weak demand.
Last month Louis Dreyfus agreed in a pact to become a strategic investor and partner to enhance Felda's trading and marketing and subsequently buy a stake in the world's third-largest palm-oil operator.
Separately Friday Felda said: "In acknowledgment of the strong result of the book-building and demand for the Felda Global Venture Holdings offering, Louis Dreyfus may reduce its participation in the enlarged issue and paid-up share capital," Felda said without elaborating.
Louis Dreyfus has secured all approvals necessary to become a Felda strategic investor, the statement added.
The June 28 listing of Felda on the Malaysian Stock Exchange is intended to create a global powerhouse in palm oil, an ingredient in goods ranging from lipstick to potato chips and biodiesel.
MIDF Amanah Investment Bank tipped a 12-month target price for Felda shares of MYR5.30 and expects the company to pay a hefty dividend this year.
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