Retirement Fund Inc (KWAP), one of the largest shareholders of IJM Corporation Bhd, has decided to reject a takeover offer from Sunway Bhd. Holding close to a 10% stake, KWAP concluded that the offer did not fairly reflect IJM’s true value or future potential.
This decision aligns with other major institutional investors. Both Employees Provident Fund (EPF), which owns about 21% of IJM, and Permodalan Nasional Bhd (PNB), with a 13% stake, also rejected the proposal. The collective stance of these large shareholders significantly reduces the likelihood of the deal going through.
Sunway’s offer was structured as a mix of cash and shares, valuing IJM at RM3.15 per share, with only 10% paid in cash and the remainder in Sunway shares. However, stakeholders raised concerns that the low cash portion and overall valuation undervalued IJM’s strong fundamentals. Independent valuations supported this view, estimating IJM’s worth between RM4.80 and RM6.48 per share—well above the offer price.
Despite having a solid order book of RM15.3 billion and RM2.3 billion in cash, IJM’s stock has been underperforming compared to peers like Gamuda Bhd and Sunway Construction Group Bhd. Still, IJM’s leadership, including CEO Lee Chun Fai, has been exploring strategies such as potential listings and divestments to unlock value.
Sunway justified its offer by stating it aligns with analysts’ average target price and reflects a relatively high earnings multiple. However, with acceptance levels below 13% and a requirement to exceed 50% ownership, the deal faces significant hurdles and may need revision or extension.
What I Learned:
From this case, I learned that large shareholders play a critical role in major corporate decisions like mergers and acquisitions. Even if an offer seems reasonable on the surface, deeper analysis—such as independent valuations—can reveal whether a company is being undervalued. I also understood that deal structures matter; a low cash component can make an offer less attractive to investors. Additionally, market price and intrinsic value can differ significantly, and strong fundamentals do not always immediately reflect in share performance.
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