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Peter Sondakh: There`s no Science to Maneuvering

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19 October 2018 14:33 WIB

Chairman dan CEO Rajawali Corporation, Peter Sondakh. Tempo/ Aditia Noviansyah

TEMPO.CO, Jakarta - Last month, the giant Indonesian palm oil company, Eagle High Plantation, sold off 37 percent of its shares, valued at US$632 million, and the stock exchange Eagle 7 percent to 2.6 percent to Felda Global Ventures, a Malaysian state-owned company. Although one benefit will be to get experts in production technology, Eagle's transaction created quite a stir, given that the sale was seen to be underpriced and took place in the midst of a downturn in the global price of palm oil.

It was the move of 61-year-old Peter Sondakh, CEO of Rajawali Corporation, who is known for his 'derring-do' in the world of business. Since the mid-1990s, Sondakh has been the man behind the sale and purchase of big companies. For example, he sold the cigarette company Bentoel to British American Tobacco (BAT) in mid-2009, even though the company had been released by Sondakh himself from a debilitating US$700 million debt since 1992.

He carried out similar transactions to a few of his other companies, like Excelcomindo (XL), Semen Gresik and Rajawali Citra Televisi (RCTI). Somehow, this never impacted negatively on his overall business empire. He kept on shining and expanding, from property to the taxi and even television industry. Not surprisingly, with his fortune of Rp29.9 trillion rupiah, this year Forbes magazine listed Peter as Indonesia's sixth-placed tycoon.

Two weeks ago, he sat down with Tempo reporters Tomi Aryanto, Retno Sulistyowati, Isma Savitri and Ali Hidayat for a special interview at his Rajawali Menara building in South Jakarta. He spoke at length on the reasons behind the sale of shares of his palm oil company as well as his other enterprises, including his RTV television station. Excerpts :

Why did you let go a big chunk of Eagle High Plantation shares to Felda Global Ventures (FGV)?

So far, our best products have been in the raw, no added value at all. Look at Thailand, which exports auto spare parts to many countries, while Singapore supplies electronic components and Malaysia produces and exports cell-phone chips valued at US$24 billion. And us? Out of the world's palm oil production of 65 million tons, 55 million come from Malaysia and Indonesia. Indonesia controls 33-35 million tons, the rest is held by Malaysia. I work with FGV because they're strong downstream, like in the production of oleochemicals and fatty acids. I'm also talking about end-users. FGV was only willing to come to Indonesia if we had some oleochemical industry (unprocessed palm oil).

My goal is to make Indonesia part of the global supply chain in the field of oleochemicals. I want Indonesia to be tops in producing biodiesel and fatty acids, so I let go part of our shares to FGV. But we also gained from a transfer of technology. About 4 million out of the 9 million hectares of oil palms in Indonesia are owned by individual farmers. Suppose one farmer owns 2 hectares of plantation, that means there are 2 million families making a living out of palm oil. Unfortunately, they have no palm oil processing plants. So, this is what we plan to discuss with the farmers. This is the idealism behind the move.

How much and what else did Eagle get from the divestment to FGV?

With the cash and about 2.6 percent of their shares, we will use to reinforce our corporate capital. If the oleochemical business expands, we will need additional capital. Later, when the money comes in, we will buy them (the shares) back from the market. My objective is to have more of their shares. But we'll do it in stages. The important thing is that we find our footing first, then slowly expand.

Why choose FGV?

Because FGV operates in 13 countries, the largest in Malaysia and they're strong in the field of oleochemicals. FGV has, for a long time, tried to get into Indonesia to expand their plantations. In Malaysia, they can't go anywhere else, after buying just 8,000 hectares of plantation. On average, their plantations last over 20 years, while they should be replanting within 25 years. Their cost of production is higher than ours, so understandably, FGV wanted to come to Indonesia.

Meanwhile, I have this desire of making Indonesia a global supplier of oleochemicals. Alone, I would be limited in my capacity. With joint capital, our business would grow faster. FGV itself has a major source of funding.

When did negotiations with FGV take place?

Five months ago, this year.

Some Malaysian media said this transaction went smoothly because of your close relations with Malaysian Prime Minister Najib Razak.

It's true that I'm acquainted with the Malaysian prime minister, and I do enjoy friendship with him. But this has nothing to do with him at all. He's the prime minister, why would he be involved in business? During the time of this transaction, I only met him once and it had nothing to do with the price or anything.

This is the downside of online media. The smooth transaction was attributed to my acquaintance with the Malaysian prime minister. One blogger even said we bought property in Malaysia, yet we bought it through international tender. And about the project in Langkawi, we were just the minority, while the majority bidder was the Malaysian Finance Ministry. At that time, we were asked to develop it because of our experience, because they were hurrying before the Asian Summit. That project was completed in 15 months.

Some say the price of the shares you sold to FGV was too low.

In Malaysia, this was seen as too expensive, but I know friends say this is cheap. Maybe it's because the politics in Malaysia is different. That's not my business, let it be. If it's seen as expensive, my question is, is anyone selling? Palm oil plantations today are rare commodities.

Did you intentionally sell the shares when prices were low?

I see it as long term. We have 425,000 hectares, with 152,000 hectares planted with oil palm. Even so we still need to plant more if we want to develop an oleochemical industry. This is because when the area is more than 100,000 hectares, the production will have reached 0.5 million tons of CPO, and that needs to go downstream. But we don't have the technology, while they have it. (*)

Read the full interview in this week's edition of Tempo English Magazine



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