Share
KUALA LUMPUR (April 2): For investors who are weighing Sunway Bhd's (KL:SUNWAY) takeover bid for IJM Corp Bhd (KL:IJM) ahead of the April 6 deadline, a simple arithmetic comparison might be an alternative way to assess the offer.
The asset valuation debates such as intrinsic asset values or potential synergies derived from forming a bigger construction giant aside, the question for some shareholders is the tangible outcome of accepting the deal, namely the instant return.
Based on Wednesday’s closing price, one block of 1,000 IJM shares at RM2.23 has a current market value of RM2,230.
If the IJM shareholder accepts Sunway’s offer of RM3.15, he or she would receive RM325 in cash and 501 Sunway shares. Based on the closing price of RM5.18 on Wednesday, the block of 501 Sunway shares is worth RM2,920.18.
This translates into a gain of RM690.18 per 1,000 shares, or nearly 31%, compared with the prevailing market value. For one block of one million shares, the gain would be RM690,180, including RM325,000 cash.
To recap, Sunway’s takeover offer is a cash-plus-shares deal. The cash portion is 10% of the offer price while Sunway will pay the rest in shares issued at RM5.65 each. The offer is open for acceptance until 5pm on April 6.
At face value, the apparent premium may attract arbitrage-driven investors seeking to capture the near 30% upside.
Crucially, the arbitrage opportunity depends on whether Sunway secures acceptances exceeding 50% plus one share as its offer is conditional upon the acceptance level.
Failing to garner the acceptance threshold, the offer will lapse, and the anticipated gains may not materialise.
Besides, in the longer run, the long position on Sunway shares would only be beneficiary when Sunway's share price does not drop substantially below the current price.
Some quarters, however, may counter argue that there isn’t any guarantee that IJM's share price will not fall back to the pre-Sunway offer level at around RM2 if not lower if shareholders are holding onto IJM shares.
However, some dealers caution that executing such a strategy is not straightforward due to procedural and timing constraints.
A stockbroker noted that shareholders must complete the acceptance process — involving the physical transfer of shares through brokerage houses — before the transaction can proceed.
For new investors, timing is rather tight as shares must be purchased no later than April 2 under Bursa Malaysia’s T+2 settlement cycle. Purchases made on April 2 would only be credited on April 6, leaving little time to complete acceptance.
So far, there is no sign of investors taking any significant arbitrage position, likely because the market does not see the deal succeeding.
..........
Get EdgeProp's inaugural monthly print edition! Free delivery is available for selected regions. Subscribe now.
