IOI Corp to buy out property arm

Planter IOI Corp Bhd plans to pay RM506 million, or RM2.60 a share in a cash-and-share deal to buy out IOI Properties Bhd before taking it private, the company said yesterday.

IOI Corp now holds 76 per cent of IOI Properties, and it has offered 33 sen cash and 0.6 new share for every share that it does not own in the builder.

The offer values IOI Properties at 0.66 time of its net assets per share of RM3.95 as at September last year.

IOI Corp will pay for the cash portion with internal funds or borrowings, the company said in a Bursa Malaysia announcement yesterday evening.

Analysts said IOI Corp can comfortably manage the cash offer since it is sitting on a cashpile of RM1.4 billion with net gearing of 46 per cent as of September last year.
"We believe privatisation would make sense given that IOI Properties is illiquid with 24 per cent held by minorities, of which close to 10 per cent is owned by state-linked funds like Valuecap and the Employees Provident Fund," Citigroup analyst Penny Yaw wrote in a report on Tuesday before the deal was announced.

"Moreover, IOI Properties is trading at a steep discount to its net asset per share of RM3.95," Citigroup said.

The privatisation was widely speculated after both companies requested for trading in their shares to be halted last Friday. Trading in both counters will resume today.

Shares of IOI Properties were last traded at RM2.22 before the trading suspension, while IOI Corp ended at RM3.92.

IOI Corp said a full control in IOI Properties will give it greater room to plot the future of the property arm and let it streamline the plantation and property business.

IOI Properties' public spread has also fallen below the 25 per cent required of a listed company since July last year, and the weak stock market has made it hard to rectify the shortfall, the company said.

The deal also allows IOI Properties investors to swap the illiquid shares into more actively traded IOI Corp, the company said.

The takeover still needs the authorities approval and IOI Corp shareholders' greenlight.

By Business Times (by Chong Pooi Koon)