PETALING JAYA: Sunway Bhd
’s voluntary takeover offer for IJM Corp Bhd is still on the table despite speculation that the risks are now higher, following the offer’s rejection by Permodalan Nasional Bhd (PNB).
Government-linked investment companies (GLICs) hold an estimated 48% of IJM’s shares. PNB owns a 13.5% stake, with the Employees Provident Fund (EPF) holding the largest stake in the company at 20.52% and Retirement Fund Inc holding another 9.63% stake.
Yeoh Keat Seng, a fund manager with Kumpulan Sentiasa Cemerlang Sdn Bhd, said it may be too soon to speculate whether the other GLICs would follow PNB’s lead. The offer requires that Sunway gets more than 50% of the voting shares in IJM on or before April 6.
The speculation revolves around government funds, that their acceptance would be crucial for the offer to be successful. The EPF has not issued a statement to accept or reject the offer despite speculation that the government funds may vote against the offer.
On how PNB has voted, Yeoh said: “I was a bit surprised that PNB rejected the offer before waiting to see whether Sunway revises it higher.”
Yeoh said fund managers have a fiduciary duty to act on the best interest of their clients. Shareholders would need to weigh whether IJM can deliver on the plans it has laid out over a short timeline to unlock value.
“Shareholders are being asked to forego immediate returns (by not taking up the offer) for potentially higher returns further out. Even then, the potential returns will depend on whether the management can deliver,” he added.
IJM announced three major initiatives to unlock value following the independent advice circular on the offer issued by M&A Securities, which together with IJM’s board of directors, recommended shareholders reject the offer made in mid-January at RM3.15 per share in a cash-and-share deal totalling RM11bil, as it was deemed “not fair” and “not reasonable”.
The company, to convince shareholders, laid out plans to list the Malaysian and Singaporean construction assets, exit the Indian market where the company has infrastructure and property assets and, monetise mature highway assets such as Besraya and Lekas.
IJM chief executive officer and managing director Datuk Lee Chun Fai argued in a media briefing on Monday that not only did the offer undervalue the company and its potential earnings, but also those who accepted the Sunway offer would only capture about 20% of the upside.
Another fund manager was just as surprised over PNB’s rejection.
“I cannot say for sure how the other GLICs will vote, but for other institutional investors, this offer is a good opportunity to monetise as IJM’s share price has underperformed,” she said.
She noted that it remains unclear why PNB rejected the offer as the average target price of 17 brokerages covering IJM stood at RM3.29 a share, none exceeded RM4 for fair value, with the lowest being a foreign brokerage at RM2.60 and the highest at RM3.80.
“As a fund manager, we can only look at the facts and not speculate on PNB’s decision,” she said.
“The share price is not even trading at anywhere near the offer price, with the highest it traded at RM2.80. The market is valuing the company much lower than the offer price, so did M&A Securities get it right or all 17 analysts got it wrong?” she asked.
She said IJM has good assets but lacks visibility, which was also acknowledged to an extent by Lee, who pointed out during the Monday briefing that having a mix of assets, across Malaysia, India and the UK and in different currencies, made it difficult for the market to value them, hence the initiatives to list some of these assets separately.
IJM has construction, property, industry and infrastructure divisions comprising tolls and a port on Peninsular Malaysia’s east coast.
“If the offer fails, the share price will fall further as a lot of funds will sell. Shareholders will have to choose whether to put their confidence in the current management of the company or to place it with Sunway,” she said.
IJM’s shares closed unchanged at RM2.31, with 6.68 million shares done. M&A valued IJM’s shares from RM5.84 to RM6.48 per share or RM20.5bil to RM22.7bil while secondary financial adviser Rothschild & Co Malaysia valued the shares from RM4.80 to RM5.63 per share or RM16.8bil to RM19.7bil.
