IJM Land to be taken private at RM1.98b or RM3.55 per share

by **Cals** Wed 11 Jun 2014, 01:52

Business & Markets 2014

Written by Janice Melissa Thean of theedgemalaysia.com

Tuesday, 10 June 2014 09:47

KUALA LUMPUR: IJM Corp Bhd has proposed to take its 64%-owned subsidiary IJM Land Bhd private at RM3.55 per share, valuing the deal at some RM1.98 billion.

The offer price represents a 10.9% premium over IJM Land’s share price of RM3.20 on its last trading day before the suspension last Friday. Accounting for dividends, this is a 13.06% premium.

“This will provide the group with greater liberty to plan and decide on the strategic and future business direction of IJM Land,” IJM Corp said in a filing with Bursa Malaysia yesterday.

It said taking the subsidiary private would allow IJM Land to leverage on the financial standing and resources of the group to strengthen its position to undertake larger scale projects in the future.

To acquire the remaining shares it does not presently own in IJM Land, IJM Corp has offered to pay RM3.55 apiece in the form of 0.5 IJM Corp ordinary shares at an issue price of RM6.70 per share and 20 sen cash.

This will involve the issuance of 279.39 million consideration shares at RM6.70 per share, or RM1.87 billion, and a cash consideration of RM110 million.

The total sum of RM1.98 billion is based on the 558.77 million of IJM Land’s issued capital, or 35.85% stake not presently held by the group.

The offer price of RM3.55 is equivalent to a 15% premium to the five-day volume-weighted average market price of IJM Land shares up to its last trading day before suspension, June 5. This is adjusted for a 6 sen per share interim dividend.

The RM6.70 issue price on the other hand represents a 1% premium to the five-day volume-weighted average market price of IJM Corp shares up to its last trading day before suspension, June 5. This too is adjusted for a single-tier second interim dividend and special dividend of 11 sen and 10 sen per share.

In the run-up to IJM Corp’s announcement of the proposed move, market excitement drove up share prices in both IJM Corp and IJM Land.

IJM Land shares surged 7.6% in just three days, touching a 52-week high of RM3.27 last Wednesday. It retreated to a close of RM3.20 the following day, just before its shares were suspended. This gave it a market capitalisation of RM4.99 billion.

As for IJM Corp, its shares jumped 3.4% over four days to a 52-week high of RM7.01 last Tuesday to later close at RM7 on June 5, giving it a market capitalisation of RM10.14 billion.

“As the proposed offer entails an exchange of shares, IJM Land shareholders will gain from improved liquidity arising from a bigger free float of IJM Corp shares in the stock market while still continuing to participate in the future growth of IJM Land indirectly via IJM Corp,” it said in the announcement.

This is regarded as a fair trade-off as IJM Land shares have been trading at low liquidity for the past 12 months, with daily trading volume of only 0.06% of its issued share capital, it said.

This is comparative to IJM Corp shares which have a daily trading volume of 0.21% of IJM Corp’s issued and paid-up share capital.

As at the end of March 2014, IJM Land’s net assets stood at RM3.28 billion, representing a price-to-book ratio of 1.68 times. Net profit for the financial year ended March 31, 2014 came in at RM533.23 million, giving it a price-earnings ratio of 10.38 times.

This article first appeared in The Edge Financial Daily, on June 10, 2014.