The Employees Provident Fund (EPF), which is the largest shareholder in IJM Corp Bhd, chose to voluntarily abstain from voting on Sunway Bhd’s takeover proposal for the construction and infrastructure group. This decision was made because EPF holds shares in both companies, creating a potential conflict of interest.
At Sunway’s extraordinary general meeting (EGM), an overwhelming 99.27% of shareholders approved the proposed cash-and-share acquisition deal. Earlier, EPF’s chief executive officer Ahmad Zulqarnain Onn had indicated that the fund would wait for the independent advice circular (IAC) before deciding whether to accept the offer.
The IAC, prepared by M&A Securities Sdn Bhd and released to IJM shareholders on March 13, concluded that Sunway’s offer was neither fair nor reasonable. Based on a sum-of-parts valuation ranging from RM5.84 to RM6.48 per IJM share, the offer price of RM3.15 represented a significant discount of about 46% to 51%. Although the offer was slightly above IJM’s net assets per share of RM2.93 (a premium of around 7.5%), the adviser still recommended that both the board and shareholders reject the proposal.
EPF holds a 20.523% stake in IJM and also owns 9.73% in Sunway. The takeover proposal values IJM at approximately RM11 billion. Following the developments, IJM’s share price closed at RM2.49, giving it a market capitalisation of about RM9.08 billion, while Sunway’s shares ended at RM5.31, with a market value of RM36.14 billion.
What I Learned:
From this case, I learned that institutional investors like EPF may choose to abstain from voting when they have significant stakes in both the acquiring and target companies to avoid conflicts of interest. I also understood the importance of independent advice circulars in guiding shareholder decisions, especially when takeover offers are priced at a substantial discount to intrinsic valuations such as sum-of-parts estimates. Additionally, shareholder approval at the acquiring company does not necessarily mean the deal is attractive to the target’s shareholders, highlighting the complexity of mergers and acquisitions in the listed corporate space.
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