IJM to divest entire stake in IJM Plantations for RM1.53 billion
PETALING JAYA, 11 June 2021: IJM Corporation Bhd (“IJM” or “the Group”) announced today that it has agreed to divest its entire stake in IJM Plantations Bhd (“IJM Plantations”), representing 56.2% of shares in IJM Plantations, to Kuala Lumpur Kepong Bhd (“KLK”), for a cash consideration of RM1.53 billion. IJM will continue to be entitled to the dividend of 10 sen per share in July that was declared by IJM Plantations.
Upon completion of the disposal, IJM Plantations will cease to be a subsidiary of IJM.
Being a material transaction, the proposal is subject to the approval of shareholders and lenders at an extraordinary general meeting to be convened at a date that has yet to be determined.
IJM believes that the proposed disposal is in the best interest of the Group, given the attractive offer price and the maturity of the plantation business, which it currently has no plans to expand further. The proposed disposal will result in a gain on disposal of RM700 million.
Elaborating on the proposed transaction, CEO & Managing Director of IJM, Mr Liew Hau Seng, said: “The recent strong CPO price environment and good showing by plantation companies have presented an opportune window for IJM to dispose of its plantation business at an acceptable price.”
The proposed disposal allows IJM to realise its value in IJM Plantations that has been underappreciated by the market, partly due to the illiquidity of the stock. With the top 30 shareholders of IJM Plantations owning over 91% of the company, the stock is tightly held. Monetising its stake in IJM Plantations would be an effective way for IJM to realise the value of IJM Plantations, and in doing so, benefit all existing shareholders of the latter. At the offer price of RM3.10, the market capitalisation of IJM Plantations is RM2.73 billion.
The proposed disposal will also enable the Group to streamline its businesses to focus on construction, property development, infrastructure concessions and the manufacturing of building materials, all of which derive synergistic benefits with one another, thereby reducing the conglomerate discount currently ascribed to IJM’s market valuation.
Historically, IJM Plantations has made substantial contributions to the Group’s financial performance, particularly during periods of major economic downturns that affected the Group’s other businesses. Over the years, however, the role played by IJM Plantations as a recurring income and counter-cyclical business to the Group’s construction-related divisions has diminished with the increasing prominence of IJM’s infrastructure concession assets. Going forward, the absence of the plantation business is also expected to reduce the Group’s earnings volatility from fluctuating crude palm oil prices and foreign exchange rates arising from the foreign currency denominated borrowings of IJM Plantations.
The net proceeds from the proposed disposal would strengthen IJM’s balance sheet and see its net gearing decrease from 44.0% to 21.6%. This would enable the Group to pursue new opportunities that may arise, fund existing working capital or capital expenditure requirements and reward shareholders by way of a special dividend or pursue share buyback activities. IJM has, in the past, declared special dividends when it successfully monetised its assets.
Good corporate governance and sustainability practices have always been an emphasis of the Group in its pursuit of long term value creation for all its stakeholders. Premised on the credible reputation and support from KLK, IJM is confident that IJM Plantations would be able to see to the continuation of the stakeholder values it has built over the years.
Commenting on the parting of ways with a Division that has been synonymous with the IJM name, especially in Sabah, Mr Liew added, “We have come a long way with IJM Plantations. The success of IJM Plantations is largely attributable to its dedicated team of employees. IJM is glad to have found a good suitor in KLK whom we are confident will look after the interest of its people as it steers the next chapter of IJM Plantations. The disposal to a reputable plantation company also ensures that the customers and supply chain of IJM Plantations continue to deal with a trusted name in the industry.”
IJM Plantations is widely regarded as a well-run mid-size upstream player. For its financial year ended 31 March 2021, IJM Plantations registered its highest ever revenue and profit since its inception in 1985. IJM Plantations has a planted area of 25,014 ha in Sabah and 36,263 ha in Indonesia with the age profile of its trees standing at 14 years and 8 years in the respective locations.
Going forward, Mr Liew added, “IJM is on firm footing as we pursue our next growth trajectory. We have been working hard to grow shareholder value, which includes adopting a more proactive stance on capital management. The significant gain from the proposed disposal of IJM Plantations is expected to reduce the steep discount to IJM’s share price and highlights sizeable value unlocking potential, given our attractive portfolio of assets.”
Notably, the value realised from the proposed disposal of RM1.53 billion equates to 21% of IJM’s market capitalisation of RM7.14 billion.
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About IJM Corporation Berhad
IJM Corporation Berhad (“IJM”), formed in 1983, is one of Malaysia’s leading construction groups and is listed on Bursa Malaysia. Its business activities encompass construction, property development, manufacturing and quarrying, infrastructure concessions and plantations.
Headquartered in Selangor, its operations are located in 8 countries, with primary focus in Malaysia, India and Indonesia. The Group presently has a market capitalisation of around RM6.5 billion and as of March 2021, the Group employed around 4,100 employees and had total assets of RM23.5 billion.
The Group’s belief in a shared destiny with its employees remains pivotal to its growing success while its reputation for professionalism, performance and good governance is acknowledged by customers and investors alike from its numerous corporate and industry accolades. IJM is committed to ethical business conduct and subscribes to the principles of good corporate citizenship for sustainable growth and development.
For more information, visit www.ijm.com
About IJM Plantations Berhad
The Group commenced operations when it first ventured into Sabah, Malaysia in 1985. The Group has gradually jumped the curve having established its presence regionally by expanding its operations into Indonesia. It has a planted landbank of over 61,000 hectares. The Group has seven (7) palm oil mills. The principal activities of the Group are cultivating of oil palm, processing oil palm fresh fruit bunches (“FFB”) into crude palm oil (“CPO”) and processing of palm kernel (“PK”) into crude palm kernel oil and expeller.
For more information, visit www.ijmplantations.com
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