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Wednesday, November 24, 2010

IJM Land to merge with MRCB in share-swap deal

From left: MRCB CFO Chong Chin Ann, CEO Mohamed Razeek Hussain, IJM Land MD Datuk Soam Heng Choon and chairman Datuk Krishnan Tan at the MoU signing on Tuesday.

KUALA LUMPUR: IJM Land Bhd and Malaysian Resources Corp Bhd (MRCB) plan to merge via a share swap in a newly incorporated company that is slated to emerge as the nation's second-largest property developer.

Yesterday the two companies signed a memorandum of understanding (MoU) and planned to come up with a definite agreement within three weeks.

The merger will involve a share-swap whereby the shares of IJM Land and MRCB will be exchanged for shares in the new company.

The exchange price per IJM Land share is RM3.65 and RM2.30 per MRCB share. This will translate into a premium of 27.5% and 10.2% for IJM Land and MRCB respectively to the five-day volume weighted average market price.

Post merger, IJM Land and MRCB plan not to maintain their listing status and the new company will take over their listing status by June 2011. IJM Land's market capitalisation is currently at RM3.4bil while MRCB's is about RM3bil.

MRCB CEO Mohamed Razeek Hussain said the MoU was only the first step of the merger where they would reveal further details of the agreement, such as shareholding structure and share swap ratio for the merger, in three weeks' time.

But because of rife speculation of the merger in the media, we think it will be fair to announce that both companies are in discussion and have signed an MoU pursuant to the merger. We are not ready to give the plethora of arrangement just as yet, he said after the MoU signing yesterday.

Meanwhile, IJM Land chairman Datuk Krishnan Tan said the two companies complement each other via the merger.

It's a merger between businesses, people and branding to take both companies to the next level. It's a good marriage, he said.

MRCB specialises in high-rise development office and condominiums while IJM Land projects are slanted towards mass township of mixed developments.

According to a presentation revealing some preliminary details of the merger, the new company is anticipated to be a mega-size property developer with implied market valuation of RM7bil, combined annual revenue of RM2bil and net asset of RM3bil, landbank in excess of 9,000 acres and increase in geographical presence.

AmResearch said the merger between MRCB and IJM Land made sense.

IJM Land could leverage on MRCB's advantage in Sungai Buloh land. MRCB has been assisting the EPF in drawing up the masterplan for the redevelopment of the RRI (Rubber Research Institute) land (in Sungai Buloh).

The research house added that IJM Land would bring expertise and a strong track record to the partnership as MRCB lacked experience in township development.

Separately, OSK Research said the merger would boost synergy and economies of scale. We believe the combined entity will stand a strong chance of being appointed the master developer of the prized piece of federal land at RRI.

However, Krishnan said the purpose of the merger was beyond any specific project and was more towards complementing each other and to be more competitive.

MRCB's largest shareholder is the EPF while IJM Land is a unit of IJM Corp Bhd, a construction and plantation group.

On Nov 4, UEM Land Holdings Bhd made a RM1.4bil takeover offer for Sunrise Bhd that would make it the largest developer of the country.

IJM Land, in its filing to Bursa Malaysia, said its net profit fell by 19.4% to RM30mil for its second quarter ended Sept 30 from a year ago. Revenue for the quarter under review also fell by 30% to RM212.9mil.

The decrease in both revenue and net profit for the quarter was due to strong take-up rate achieved in the preceding quarter for Lot 28 in Penang and sale of units (Platino and Summer Place in Penang) previously reserved for bumiputra being offered to the public.

However, cumulatively, for first six months of the current financial year, IJM Land saw its net profit surged by 30.8% year-on-year on the back of RM577.9mil of revenue.

By The Star

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