EPF allows offer in MRCB to lapse

KUALA LUMPUR: The Employees Provident Fund Board (EPF) has allowed its conditional takeover offer of construction and property development firm Malaysian Resources Corp Bhd (MRCB) to lapse after receiving acceptances amounting to only 3.34% comprising 45.64 million shares.

EPF said its RM1.50 per share offer had failed to meet the acceptance condition and it would not extend the offer period, which had lapsed at 5pm yesterday.

As of the closing date yesterday (April 13), EPF held only 41.948% of MRCB after receiving the acceptances pursuant to the offer, far short of the 50% plus one share condition required for it to be successful. As at the posting of the offer document, EPF held 38.61% comprising 527.93 million shares in MRCB.

The offer made on March 3 was conditional on receiving acceptances that would result in it holding more than 50% of MRCB. EPF had said it would not its intention to privatise MRCB and would maintain its listing status.

According to a statement issued on EPF’s behalf by RHB Investment Bank Bhd, EPF would return all the MRCB shares, which had been transferred into its CDS account to the respective shareholders within 14 days.

EPF initiated the conditional offer following its subscription of a rights issue that pushed the provident fund’s stake in MRCB past the general offer trigger of 33%.

MRCB had undertaken in December a one-for-two rights issue at RM1.12 a share. EPF, which held about 32% in MRCB at the time, had also underwritten the rights issue compelling the agency to take up any unaccepted rights. As a result, EPF’s stake in MRCB rose to 33.78% crossing the 33% threshold.

During the most part of EPS’s offer period, MRCB’s share price had been capped by the offer price of RM1.50 until recently when Prime Minister Datuk Seri Najib Razak announced on March 30, 2010, that the government and the EPF would form a joint venture to develop a 3,000-acre tract of land in Sungai Buloh into a new hub for the Klang Valley, with a targeted investment of RM5 billion.

Investors took that to mean EPF was likely to use MRCB as its vehicle for the development in Sungai Buloh. The Edge Financial Daily had also reported that MRCB was a frontrunner to be appointed the master developer of the project.

Analysts have also speculated that MRCB would take a large part of the development work in Sungai Buloh while smaller parcels would be put out to other developers.

Since then, MRCB’s share price had surged and reached an intra-day high of RM1.72 on April 6, but had gradually eased. The stock fell two sen to RM1.59 yesterday (April 13), with 6.68 million shares done. MRCB posted its 52-week high of RM1.80 on Jan 15, 2010.

Analysts had advised investors to shun the offer, in view of a greater fundamental value in MRCB.

HwangDBS Vickers Research has valued MRCB at RM1.80 per share, which was 20% above EPF’s offer price and excluded any potential net asset value accretion from potential government land sale.

The research house said its sum-of-parts target price for MRCB would rise to RM2.30 assuming it clinched an additional 25 acres of government land in KL Sentral/Brickfields based on a plot ratio of seven times and average selling price of RM700 per sq ft.

It said this might be conservative as it did not include the other government landbank — Jalan Conlay, Jalan Ampang Hilir and the Rubber Research Institute Malaysia land — which was also up for grabs.

This article appeared in The Edge Financial Daily, April 14, 2010.