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IJM Land-MRCB merger called off

December 31st, 2010 Leave a comment

PETALING JAYA: Property firms IJM Land Bhd and Malaysian Resources Corp Bhd (MRCB), which announced their plan last month to merge and potentially become the second largest property player, has aborted the plan.

MRCB and IJM Land announced to Bursa Malaysia yesterday that the merger was aborted as both companies were not able to reach an agreement on the definitive terms and conditions of the proposed merger, following a series of discussions.

They also announced that trading in the shares of both companies was suspended and would only resume next Monday.

MRCB and IJM Land officials declined to comment when contacted by StarBiz.

It is believed that the much anticipated merger between the two firms, announced on Nov 23, was called off due to issues over management and shareholding structure of the new entity post-merger.

Although it could not be confirmed, an analyst with a local investment bank said the main reason for the deal to be aborted was that both companies were not able to agree on who would lead the new entity, post the merger, and what the shareholding structure would be like.

“At this juncture, I don’t see the point for IJM Land to look for another partner. But for MRCB, it’s different since the reason for the merger was to bid for the Employees Provident Fund (EPF)-led development of the 3,000-acre Sungai Buloh project,” the analyst said.

She said that even without the merger, IJM Land would do well since the company’s earnings were decent, based on several of its ongoing projects.

CLSA Securities Malaysia Sdn Bhd analyst Clare Chin said the merger would have been a win-win situation.

“I’m quite disappointed. Now, it’s back to status quo. They’ll just have to individually bid for the projects coming out from the Economic Transformation Programme including the EPF-led development in Sungai Buloh,” she said.

However, Chin said this was not in itself a bad thing as both companies were quite capable by themselves and would be able to grow organically.

AmResearch Sdn Bhd research head Benny Chew said in a report that IJM Land could be better off without the merger as the company’s valuation would have been severely diluted by the injection of certain low-yielding assets from MRCB.

He added that in the near term, the earnings and valuations in the enlarged entity were not compelling, especially without the transfer of low-yielding assets out of the enlarged entity (which was to take place post-merger).

Chew said that on the surface, the termination of the proposed merger might not be good for IJM Corp (the parent of IJM Land) due to the company’s perceived front-running role in EPF-led infrastructure and property development projects.

“But, this does not mean that IJM Corp will lose out. It should be noted that EPF is still the single-largest shareholder in IJM Corp with a 16% stake, followed by Permodalan Nasional Bhd at 9%,” he said.

The merger between the two property firms, if it were to materalise, would have created the country’s second-largest property player with a market capitalisation of over RM7bil and landbank of over 9,000 acres.

According to analysts, the enlarged entity was expected to have combined revenue of over RM2bil and an asset base in excess of RM3bil.

The property development activities of MRCB are mainly concentrated in KL Sentral apart from a 4,000-acre township in Perak.

IJM Land’s strength is in township developments with projects focused on the Klang Valley, Penang, Johor, Negri Sembilan, Sabah and Sarawak.

The company also has projects in Vietnam and China, and a total land bank of over 5,000 acres.

SOURCE: The Star

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