Part 2 featured IJM Land - MRCB.
For the 3rd and final part - of course I will featured the 3rd merger - the Sunway Holdings Bhd and Sunway City Bhd.
Sunway group founder Tan Sri Dr Jeffrey Cheah Fook Ling and and his daughter Sarena Cheah Yean Tih is making a whopping offer of some RM4.6 billion to acquire the entire business including assets and liabilities of Sunway Holdings Bhd and Sunway City Bhd. They are making the offer through Sunway Sdn Bhd (Sunway) with will be satisfied by a combination of new shares and cash. Both Jeffrey and Sarena are directors of Sunway.
Under this exercise, Sunway Holdings and SunCity will be delisted from Bursa Malaysia, while the merged SSB, or the merged entity, will assume a new listing by the middle of next year after the takeover exercise. Under the deal, SSB proposed to take over SunCity at RM5.10 per share and Sunway Holdings for RM2.60 per share, representing a 20% premium to the two companies’ five-day volume weighted average price.
Under this exercise, Sunway Holdings and SunCity will be delisted from Bursa Malaysia, while the merged SSB, or the merged entity, will assume a new listing by the middle of next year after the takeover exercise. Under the deal, SSB proposed to take over SunCity at RM5.10 per share and Sunway Holdings for RM2.60 per share, representing a 20% premium to the two companies’ five-day volume weighted average price.
Based on the current value, a combined Sunway - SunCity will create a RM 3.5 billion entity, making them the 4th largest property developer by market capitalization. However, I do not know if the 're-listed company' will be under the Property sector or not, or maybe stick to the Construction sector. Both the sectors have different requirements and criteria - but my pick will be that the new SUNWAY will be relisted under the Property sector.
Looking at the merger synergies - the most obvious benefit on both sides will be having a larger and better capitalized entity. With a market capitalization of over RM3.5billion - the merged entity is also expected to have a combined total revenue of more than RM3billion per annum.
I dont see much improvements in terms of its landbank though - as most of its remaining landbank are in Sunway City Ipoh as well as Sunway Semenyih - however, they do have some pocket lands in Kota Damansara, Mont Kiara as well as Sunway area, so we shall see how they will capitalize on this.
Looking at the stock market and the investor's point of view - the merged Sunway Group will have a lower PE (Price-to earnings) ratio than the existing two companies. Both Sunway Holdings Bhd as well as Sunway City Bhd are currently already undervalued. The privatization values them at about 12 times PE for 2011. As I mentioned that IJM Land-MRCB will be valued at about 2.61 times the price-to-book, the merged Sunway Group will only have a 0.98 times price-to-book valuation - making them a very very attractive and cheap stock for investors to look at.
Its free float wise would still be similar as before, with Tan Sri Jeffrey Cheah still being the majority shareholder with about 44%, while its other majority shareholder, Singapore's Government Investment Corporation's shareholdings will be diluted to about 12%.
I personally think that the enlarged Sunway Group still has plenty to offer, plenty of surprises to the investor's market. An enlarged Group - consisting of a construction arm, property, quarry and building materials and so on. Do bear in mind that they recently just listed the Real Estate Investment Trust - the Sunway REIT. Looking at its entire corporate structure, I can see quite a complete business cycle. Property division buys land, develops commercial building, construction division builds and completes the commercial building, and then the completed building is then injected into the REIT as an exit strategy. Isnt that just the most ideal?
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Looking forward into 2011.
I had mentioned that I believe that 2011 would be an exciting year for the stock markets and corporate plays. I see plenty of consolidations, privatizations, M&As and so on. I wonder if property giants S P Setia Bhd, who shares a similar majority shareholder in PNB - would merge with other listed property players whom PNB have large stakes in.
Previously I would have thought that the Genting Group would merge all of its listed arms together. However, they have chose a different route - instead of consolidation, they have split out the businesses according to gaming, resorts as well as plantations. An interesting school of thought would think that uprising property giant - Mah Sing would be a next target for an M&A as well. But for Mah Sing - I think they are more likely to acquire another company rather than merge, as its majority shareholders hold about 66% - which means they have the final say.
Another interesting school of thought - sees a mega merger, between three construction giants GAMUDA BHD, IJM CORPORATION BHD and WCT BHD. In my honest opinion, I think it is a highly possible corporate deal. These three giants merging to become a super giant - allows them to raise funds from the debt markets and equity markets, from both the local as well as international markets - raise funds for what, you may ask?
Of course there is a mega project to be looked at. The RM40 billion MRT of course. =) I figured there would be no one company that is strong enough to raise that amount of money to construct the MRT under the Private Finance Initiative method. Hence... I believe this merger might come true.
Is this a possible likelihood? We shall wait and see.