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Wednesday, November 24, 2010

IJM Land-MRCB deal to create RM7b merger

IJM Land Bhd and Malaysian Resources Corp Bhd (MRCB) will merge to create a RM7 billion property company that will be the country's second largest after the recently-proposed UEM Land Bhd-Sunrise Bhd union.

IJM Land and MRCB sealed an initial deal on the proposed merger yesterday.

It is still unclear who will take the lead in the merger, but based on the two companies' shareholders fund size, IJM Land looks set to be in the driver's seat.

IJM Land shareholders' funds stood at RM1.65 billion as at March 31 2010, while MRCB's was about RM697.1 million as at December 31 2009.

IJM Land chairman Datuk Krishnan Tan said both parties had initiated the merger talks.
"We have common shareholders, but it stops there," Tan said at a press conference after sealing the initial agreement in Kuala Lumpur yesterday.

According to latest filings at Bursa Malaysia, Employees Provident Fund (EPF) owns an indirect stake of 62.47 per cent in IJM Land and about 42 per cent in MRCB.

The two parties are yet to come up with a definitive agreement, but have agreed that the merger will be done through a new company, in which IJM and MRCB will exchange shares, or a combination of shares and cash.

The price for the share swap has been fixed to curb speculation on the stocks.

Shares in IJM Land and MRCB will be exchanged based on RM3.65 per share for IJM Land and RM2.30 per share for MRCB.

This represents a 19 per cent premium and 7 per cent premium respectively to IJM Land's and MRCB's last traded share price on Monday.

A definitive agreement is expected to be sealed by December 14 this year, company executives said.

The merged entity will have total assets of RM3 billion and 3,600ha of landbank.

"With the significant increase in size, the merged group will be able to further strengthen its market leadership in the commercial and residential segments of the property market and compete more effectively in both local and international markets," MRCB chief executive officer Mohamed Razeek Hussain said.

The merged entity is expected to be listed on the local stock exchange by the middle of 2011.

Considering that the entity is slotted to be purely in property development, there is a possibility that MRCB would divest its interests in its other non-core businesses.

"Post-merger, there will be a rationalisation exercise... so we could divest or we could keep it (non-core businesses)," Razeek said.

MRCB's engineering and construction division, for example, owns the concessions for Duta-Ulu Kelang Expressway (Duke) and Eastern Dispersal Link Expressway (EDL) in Johor Baru.

It is also involved in several construction projects such as the construction of the traffic dispersal linkage at Jalan Tun Sambanthan for the development of Kuala Lumpur Sentral.

By Business Times

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