MRCB-IJM Land deal

THE merger between Malaysian Resources Corp Bhd (MRCB) and IJM Land Bhd is expected to create the country's second-largest property company with a market capitalisation of over RM7 billion and landbank of more than 9,000 acres.

The newly merged entity (newco) is expected to be listed after the second quarter of next year while a more solid merger agreement is expected to be signed by Dec 14.

In the proposed merger, shareholders of both companies will exchange their shares for shares in the newco. Shareholders of MRCB and IJM Land will be offered a non-binding offer price for their shares at RM2.30 and RM3.65, respectively, which are at premiums of 15.6% and 18.1%, respectively, over their last traded prices last Friday.

The offer valued IJM Land at a price-to-book ratio of 2.43 times and MRCB at 2.61 times, based on their latest reported results as at Sept 30.

The newco is also expected to have combined revenues of over RM2 billion and an asset base in excess of RM3 billion.

The Employees Provident Fund (EPF) is a common shareholder in all the companies involved in the merger. The EPF owns a 19.4% equity stake in IJM Corp, while it is the single largest shareholder of MRCB with a 41.63% stake. IJM Land is in turn a 62.48%-owned unit of IJM Corp Bhd.

The property development activities of MRCB are mainly concentrated in KL Sentral, although it has a 4,000-acre township in Perak.

IJM Land's strength is in township developments with projects focused in the Klang Valley, Penang, Johor, Negri Sembilan, Sabah and Sarawak. It also has projects in Vietnam and China, and a total landbank of over 5,000 acres.

The merged company is also widely expected to gain from the development of the 3,300 acres of Rubber Research Institute (RRI) land in Sungai Buloh, which was awarded to the EPF.

This article appears in the Nov 29 edition of The Edge Financial Daily.