PETALING JAYA: IJM Corp Bhd’s wholly-owned subsidiary, Road Builder (M) Holdings Bhd, has entered into a heads of agreement with Silk Holdings Bhd to acquire all the 220 million shares of RM1 each in Sistem Lingkaran-Lebuhraya Kajang Sdn Bhd (Silk) for RM398mil cash.
Silk Holdings said in a statement that the closing of the transaction was subject to the execution of a mutually satisfactory definitive share sale agreement, which is anticipated to take place within 14 days of the signing of this agreement.
The finalisation of the transaction, meanwhile, is dependent on the approvals from the Economic Planning Unit, Unit Kerjasama Awam Swasta and shareholders of Silk Holdings, among others.
Shares of Silk Holdings have been on an uptrend since the beginning of May. The counter started rising from 63.5 sen on May 5 to a high of 88.5 sen on May 21. It closed yesterday unchanged at 85 sen on a volume of 5.56 million shares.
IJM told Bursa Malaysia that the purchase consideration was agreed on a willing buyer-willing seller basis after taking into consideration the actual traffic and financial and discounted future cash flow projections for Silk.
Silk is the concession holder for the 37-km Kajang Traffic Dispersal Ring Road (Silk Highway) under the concession agreement executed on Oct 8, 1997 to finance, design, construct, operate and maintain the Silk Highway for 33 years.
The concession period has been further extended by a further three years to 36 years, ending on July 31, 2037.
IJM said the proposed acquisition was in line with the group’s strategy to increase its recurring income stream by expanding its concession asset portfolio.
“The Silk highway links the toll roads of the group, thereby improving connectivity and complementing the Besraya Highway, the New Pantai Expressway and the Kajang Seremban Highway,” said IJM.
“It is in the growth corridor with increased property developments around Kajang and nearby areas spurred by the mass rapid transit project, and has been registering traffic growth of about 16% on a compounded annual growth rate basis,” added IJM.
With the proposed acquisition, the total road length of IJM’s toll roads in Malaysia, including the upcoming 233-km West Coast Expressway, will increase to 362.8km from 325.8km.
Silk Holdings executive chairman Datuk Mohd Azlan Hashim said in the statement that after meticulous review, it said the operation of a highway concession was not within the group’s preferred growth strategy, and that the time was right for the company to unlock the value of the asset.
In the last three financial years, 70% of its revenue has come from its oil and gas division.
“Consequently, the board of Silk Holdings has agreed that it is in the best interest of all stakeholders to carefully consider the proposed sale to Road Builder, whose core competencies are more aligned with the Silk Highway company and would be in a better position to ensure the aspirations for the concession business are realised. Road Builder, as part of IJM Corp, is a well-established and highly experienced operator of concessions, and is, therefore, well-placed to further the interest of all the stakeholders of Silk Highway,” he added.