<figure id="attachment_2775417" aria-describedby="caption-attachment-2775417" style="width: 1600px" class="wp-caption aligncenter"><img loading="lazy" class="size-full wp-image-2775417" src="https://media.freemalaysiatoday.com/wp-content/uploads/2024/05/7c9d3eb6-ijm-web-pic-hq-300524.webp" alt="ijm" width="1600" height="1000" /><figcaption id="caption-attachment-2775417" class="wp-caption-text">Bumiputera firms and government-linked investment companies collectively hold more than half of IJM Corp’s shares. (IJM pic)</figcaption></figure>
PETALING JAYA: Research houses are generally positive on Sunway Bhd’s bid to take over rival IJM Corp Bhd, describing its RM11 billion offer as fair.
However, the construction and property group led by tycoon Jeffrey Cheah needs to successfully navigate past potential minefields if it is to gain control of IJM.
A majority of analysts have recommended that IJM shareholders accept Sunway’s RM3.15 per share voluntary takeover offer (VTO), citing reasonable valuation and upside from participation in an enlarged Sunway group.
TA Securities said the VTO offers shareholders an opportunity to monetise their investment at a “fair level”, adding the offer price implies forward price-earnings multiples broadly in line with IJM’s historical averages and close to its net asset value.
“We view the proposed merger as meaningfully de-risking for IJM shareholders, as it provides exposure to a larger, more diversified and higher-quality earnings platform under the Sunway umbrella,” TA said in a note today.
A combined Sunway-IJM entity would become one of Malaysia’s biggest construction and property groups, with strengthened balance sheets and increased capabilities to bid for larger projects.
Hong Leong Investment Bank notes that cost synergies from bulk procurement, vertical integration, and operational efficiencies are expected to support margins over the medium term.
Sunway announced yesterday its bid to acquire all of the 3.5 billion IJM shares at RM3.15 per share. The offer will be satisfied with 10% cash and the remaining 90% in the form of new Sunway shares at an issue price of RM5.65 each.
The offer is subject to a minimum acceptance of 50% plus one share along with shareholder and regulatory approvals, with completion expected by the third quarter of 2026.
Potential minefields for Sunway
However, not all research houses are upbeat on Sunway’s offer. Kenanga Research has advised shareholders to reject the offer, arguing it falls below its RM3.40 target price (TP) for IJM and that the share-swap component “overvalues Sunway”.
In a note today, it said the RM3.15 offer price could be a hurdle and that IJM shareholders may be inclined to reject it.
Kenanga Research noted the offer price is 7% below its TP of RM3.40 and may not fully reflect the value of its infrastructure assets and earnings potential.
It added the limited cash component and high Sunway share issuance may not entice IJM shareholders to accept the offer.
However, the biggest hurdle that Sunway could face in its takeover bid may not be related to commercial considerations and valuations.
In a note today, Public Investment Bank (PublicInvest) highlighted a reality that other research houses may not have considered.
“Given that institutional Bumiputera firms and government-linked investment companies collectively hold more than half of IJM&#8217;s shares, we believe achieving an unconditional offer (i.e. gaining &gt;50% acceptance) will hinge on their stance,” it said.
These entities include EPF, IJM’s biggest shareholder with a 16.8% stake, followed by Retirement Fund (Incorporated) (KWAP) with 9.74%, Permodalan Nasional Bhd, Amanah Saham Bumiputera, Lembaga Tabung Haji, Urusharta Jamaah Sdn Bhd, and Takafulink Dana Ekuiti, among others.
PublicInvest did not elaborate on what “their stance” would entail but the implication seems rather clear.
A successful Sunway takeover of IJM essentially means ceding control of the company to a non-Bumiputera-controlled group. This may not sit well with some quarters and could potentially derail Sunway’s plan if it becomes an issue.
Sunway is controlled by the 80-year-old Cheah – its founder and chairman – and his family members. The octogenarian holds a 0.5% direct interest and a 60% indirect stake in the group.
Sunway closed five sen or 0.9% higher today at RM5.65, giving it a market capitalisation of RM38.45 billion.
IJM rose as much as 22 sen or 8% before closing down one sen or 0.4% at RM2.74, valuing the company at RM9.99 billion.

MatchPoint Times

Sunway’s bid to take over IJM Corp not a foregone conclusion

The construction and property giant needs to navigate past potential minefields to gain control of IJM.

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