IJM: Major Takeover Bid Signals New Growth Phase

A significant conditional voluntary take-over offer has been launched by Sunway to acquire all ordinary shares of a major Malaysian conglomerate, signaling a potential shift in the market landscape. The proposed acquisition aims to create a formidable combined entity in the property and construction sectors, enhancing its scale and regional competitiveness.

Offer Details and Valuation

Sunway’s offer price stands at RM3.15 per share for the conglomerate. The consideration will be structured with 10% in cash and the remaining 90% in new Sunway shares, which are to be issued at RM5.65 each. This offer represents a notable 14.6% premium over the conglomerate’s last closing share price of RM2.75.

Based on projections for fiscal year 2026, the proposal values the group at approximately RM11 billion, translating to a Price-to-Earnings (PER) ratio of 21.5 times. For illustrative purposes, an investor holding 1,000 shares would receive a cash payment of RM315 and 501 new Sunway shares upon the deal’s completion.

Conditions and Market Dynamics

The success of the proposed take-over is subject to several key conditions. Primarily, it requires approval by shareholders at an Extraordinary General Meeting (EGM) to be convened. Crucially, the offer is conditional upon Sunway securing valid acceptances that result in its ownership of more than 50% of the target’s voting shares before the offer closes.

A significant challenge lies in the stance of majority-holding institutional Bumiputera and government-linked investment companies, which collectively hold more than half of the target’s shares. These key investors might prefer a higher cash portion or a better price, making their acceptance pivotal for the unconditional success of the offer. Should Sunway’s shareholding rise to 75%, it intends not to maintain the listing status of the target company and will invoke rights for compulsory acquisition if its control crosses the 90% mark.

Strategic Rationale and Future Outlook

The strategic rationale behind the offer is compelling: to establish a leading Malaysian property and construction conglomerate with the necessary scale to compete regionally. The combined entity is projected to boast a massive landbank with a potential Gross Development Value (GDV) reaching RM118 billion and an enlarged order book of RM13 billion. This significant financial heft is expected to attract greater investor interest, secure lower financing costs due to a larger market capitalisation, and foster a stronger credit profile.

Analyst Perspective

The investment bank views the offer positively, believing it will provide existing investors a clear path to benefit from the combined group’s enhanced growth and business diversification. Public Investment Bank has maintained its “Outperform” call on the target company, anticipating favorable outcomes from this strategic move despite the conditional hurdles.