KUALA LUMPUR (March 13): The takeover bid for IJM Corporation Bhd (KL:IJM) is “not fair” and “not reasonable”, said the independent adviser appointed to evaluate the offer.
The offer price from Sunway Bhd (KL:SUNWAY) is a discount of up to 51% to the estimated value of IJM shares, M&A Securities said in a circular. The bid is unreasonable as IJM shares are liquid and current shareholders can still participate in the company’s growth without Sunway, the adviser said.
M&A Securities advises the board of IJM to recommend their shareholders to reject the offer.
"The board has concurred with the conclusion and recommendation of M&A Securities that the offer is not fair and not reasonable,” IJM said. “Accordingly, the board unanimously recommends that the holders reject the offer.”
In January, Sunway launched an offer to acquire IJM in a cash-and-share deal that values the property-and-infrastructure company at RM3.15 per share or RM11 billion. The offer is conditional upon acceptance of 50% plus one share.
Under the terms of the proposed deal, each 1,000 shares of IJM Corp entitles its holder to RM315 in cash and 501 Sunway shares worth RM2,835. If successful, the combined entity would rival Malaysia’s largest construction firm by revenue Gamuda Bhd (KL:GAMUDA).
However, M&A Securities argued that IJM’s shareholders could realise their investment through on-market transactions without having to swap their holdings into Sunway shares, noting that accepting the offer would mean giving up their shares to become minority shareholders in Sunway.
That exposes shareholders to the “share price movement in Sunway shares, execution and integration risks associated with the proposed enlarged Sunway Group”, the adviser wrote.
Further, Sunway will not have any influence in IJM if the acquisition is unsuccessful as it now holds less than 1% of the shares, M&A Securities said.
There is no additional incentive to accept the offer and holders may continue to participate in the “potential future growth and value creation of IJM as an independent listed group, retaining full strategic, operational and financial autonomy to continue executing its growth strategy”, it said.
Shareholders of IJM will end up with minority shares of up to 20.6% in the enlarged Sunway and “significantly less control” while taking on “substantial integration, execution and traditional risks” from the merger of two sizeable and diversified conglomerates, M&A Securities warned.
IJM is in an “active value-creation process”, supported by a strong order book, diversified business ventures, geographical expansion and ongoing strategic initiatives, that is yet to fully realise its value, M&A Securities added.