Economist Urges Postponement of RM11 Billion Sunway-IJM Deal Amid Governance and National Interest Concerns
A prominent economist has advocated for a halt to Sunway Bhd’s proposed RM11 billion acquisition of IJM Corp Bhd. The call comes amid significant questions surrounding corporate governance, the valuation of the deal, and its potential implications for national interests. The Malaysian Anti-Corruption Commission’s (MACC) ongoing investigations into aspects of the transaction have further amplified concerns regarding the offer’s structure and the opportune timing of its proposed implementation.
The proposed conditional voluntary takeover (VTO) by Sunway, offering RM3.15 per share for IJM, has been met with skepticism from several research firms. Kenanga Research, for instance, has labelled the valuation as unfavourable. This assessment is particularly striking when compared to IJM’s intrinsic value, with Kenanga setting a target price of RM3.40. When normalised to Sunway’s target price of RM4.73, the implied value to IJM shareholders reportedly stands around RM2.69. This disparity suggests a potential imbalance in the value exchange between the shareholders of both companies.
Key Concerns Raised
The economist highlighted several critical areas requiring immediate attention:
- Valuation Discrepancies: The offer price of RM3.15 per share has been deemed unattractive by market analysts, with intrinsic value estimations suggesting a higher worth for IJM shareholders.
- Governance and Transparency: Allegations of corporate governance irregularities and the MACC’s investigation cast a shadow over the deal’s integrity.
- National Interest Implications: IJM is considered a strategic asset due to its extensive involvement in vital national infrastructure projects, raising concerns about its ownership by foreign entities or its control being concentrated in a manner that might not align with national strategic goals.
- Timing of the Offer: The proposal’s timing, coinciding with a period of perceived low market prices for some assets and amidst unusual market sentiment, has also drawn scrutiny.
IJM’s Strategic Importance to Malaysia
While not officially designated as a national strategic asset in the same vein as Petronas or Tenaga Nasional Bhd, IJM Corp Bhd holds significant importance for Malaysia. Its shareholding structure, which includes key institutions like the Employees Provident Fund (EPF) and Permodalan Nasional Bhd (PNB), underscores its status as an entity of public interest, extending beyond a mere private enterprise.
IJM’s operations are crucial across several sectors vital to the nation’s development and daily life:
- Public Transportation: The company plays a role in public transport initiatives, such as Penang’s LRT Mutiara project.
- Port Infrastructure: It is involved with a strategic port located in Kuantan.
- Energy and Utilities: IJM has interests in energy facilities.
- Railways: The company’s activities extend to rail infrastructure.
- Digital Infrastructure: IJM is also involved in public-scale data centres, a critical component of the digital economy.
Given this extensive involvement in national infrastructure, a postponement or significant restructuring of the acquisition process is being urged. The objective is to ensure a fair investigation and assessment, thereby safeguarding market trust and upholding national interests.
Calls for Regulatory Oversight
In light of these concerns, calls have been made for enhanced regulatory oversight of the Sunway-IJM transaction. The Securities Commission Malaysia (SC), armed with its mandate under the Capital Markets and Services Act, is urged to closely monitor the deal. The SC’s role is crucial in ensuring fair transactions, promoting transparency in valuations, and diligently assessing any potential conflicts of interest.
The economist emphasized that such an in-depth review by the SC is a standard governance practice, not an act of political interference. It is a necessary step to maintain market integrity and investor confidence.
Broader Perspectives on National Transactions
Beyond the immediate concerns, broader sentiments from various Malaysian organisations echo the need for rigorous scrutiny of large-scale corporate transactions. The Malay Consultative Council’s (MPM) PuTERA35 secretariat head, Syed Zikri Shahabudin, stressed the importance of transparency and a thorough examination of ownership structure changes, particularly when they involve entities with significant stakes in the country’s strategic infrastructure.
The involvement of major institutional investors like PNB, EPF, Retirement Fund (Inc.) (KWAP), and Tabung Haji in IJM’s shareholding adds another layer of complexity, highlighting the public and national dimension of the proposed takeover.
Syed Zikri further stressed the necessity of an independent review by authorities and market regulators. This is to ensure that no elements of conflict of interest, abuse of power, or market manipulation tarnish the transaction. The MPM’s stance is that all corporate transactions of a national scale must align with the principles of good governance and the welfare of the people. They are particularly concerned that such deals should not diminish the role of Bumiputera institutions or compromise the long-term interests of the Malay economy.
Transparency and Beneficiary Questions
The issue of transparency surrounding Sunway’s proposed acquisition of IJM shares has also been voiced by Machang Member of Parliament Wan Ahmad Fayhsal Wan Ahmad Kamal. He raised pertinent questions about the nature of the negotiation process, suggesting that the deal might exclusively benefit one party due to the apparent lack of an open bidding or selection process.
He questioned whether the negotiations were conducted in a closed or pre-packaged manner and, crucially, sought to identify the ultimate beneficiary of the transaction. His appeal for the SC to closely monitor the deal underscores the widespread concern about fairness and transparency in this significant corporate undertaking.
The Sunway-IJM deal, with its RM11 billion valuation, is currently slated for IJM shareholders to accept or reject the offer by 5pm on April 6th. The ongoing investigations and the strong sentiments expressed by various stakeholders suggest that the path forward for this acquisition may be subject to significant debate and regulatory scrutiny.
