IJM Deal – Are Malaysian Investors Financially Savvy And What Next…

Being a member of EPF, I was disappointed and felt like a bitter pill to swallow when EPF abstained from voting on the Sunway Bhd’s proposed takeover of IJM Corp Bhd at the former’s extraordinary general meeting, citing it hold shares in both Sunway and IJM. PNB who also holds significant shareholdings in both Sunway and IJM is the trend-setter and had earlier rejected the offer after a thorough, comprehensive and independent assessment, in accordance with PNB’s investment process and governance framework.

Abstention can be seen as neutrality and I was surprised as the independent advice circular (IAC) adviced that the proposed price grossly undervalue IJM and the offer is “not fair and not reasonable”. Other reasons include the small cash consideration as well as IJM’s dividend prospects and long-term growth potential. The offer price will be satisfied via 10% cash and 90% in the form of new Sunway shares at an issue price of RM5.65 each.

Note the volatility of Sunway shares, with a 52-week price range of between RM3.85 – RM5.97. The price at time of writing (31^st March) is RM4.94 – significantly lower than the RM5.65 offered, which is a confirmed over 12% loss situation.

My earlier article, ‘IJM deal – reasonableness of the takeover and makeover’ – Scoop 28/3/26, detailed out the reasons why IJM shareholders should reject the offer.

IJM was in a “sudah jatuh ditimpa tangga” situation when it lost an opportunity to bid for a job to build a multi-billion-ringgit data centre. The client suggested not to bid because the Malaysian Anti-Corruption Commission (MACC) started an investigation into IJM and the takeover proposal would also put it in a position of disadvantage.

The MACC reviewed the proposed takeover for potential conflicts of interest or abuse of power, partly due to the involvement of public funds from government-linked companies like EPF and PNB.

The earlier disappointment turned to optimism when yesterday, news showed EPF has decided to reject the Sunway offer as EPF’s investment committee had deliberated on Sunway’s offer recently and decided to turn it down. But what puzzles me is the abstention at Sunway’s EGM and two days later rejected it – could it be the ‘Chinese wall’ in EPF?

Note that The Edge earlier reported that a top Ministry of Finance (MoF) official held a meeting with the heads of investment of the EPF, KWAP, PNB and Urusharta Jemaah to discuss their position on the proposed takeover. MoF was to coordinate the response of the funds to the offer and preserve the value of IJM as a major construction and infrastructure powerhouse. Putrajaya wants to ensure that the funds work together to extract the best value from IJM.

Recent records show 72% of IJM is held by institutional investors and the most powerful shareholder groups have rejected the Sunway offer.

On the other hand, Sunway has a high insider/private company control. Ownership is heavily concentrated in private companies (approximately 59%), while institutional investors account for about 22% only. Active Equity Sdn Bhd, a private investment company, holds more than 50% in Sunway and in Sunway Construction Group Bhd and is closely tied to the Sunway Group.  

I trust retail investors and also Vanguard (holding approx. 3.16%) is well aware of the above and will decide accordingly. Additionally, peruse the independent advice circular (IAC), take cognisance of the considerably better accounting ratios of IJM and the volatility of Sunway’s share price.

As for MACC, it would be helpful if MACC could be more transparent in the three investigations since it created a negative perception on IJM rather than urging all parties not to engage in speculation or create negative perceptions.

To the Non-Executive Co-Chairman of Sunway, respectfully, I would strongly urge you to advise Sunway to call off the takeover proposal.

You are a transformational leader and through Pemandu, spearheaded Malaysia’s transition towards high income status by 2020, though we did not achieve it. With PEMANDU Associates you continuously delivered Big Fast Results (BFR) across various sectors to drive socio-economic outcomes.

Your experiences in the government and private sector is invaluable and you understood what it takes to move them from the inside out.

Please look at building winning coalitions instead of taking away a construction giant, thereby losing its brand value and give Malaysian investors more choice.

For institutional shareholders of IJM, this takeover proposal should be a wake-up call to speed up monetisation of IJM assets and to chart an exciting future growth.

What say you…

 

Saleh Mohammed