IOI Corp to stick to offer price

IOI Corp Bhd will not offer more than RM2.598 per share and will proceed with taking IOI Properties Bhd private.

In response to a news report of IOI Prop minority shareholders holding out for better offer, IOI Corp said in the light of the current global economic downturn, the offer is fair and reasonable.

"The offer price of RM2.598 represents a 20 per cent premium over the five-day weighted average price of IOI Prop up to January 30 2009 of RM2.16," it told the stock exchange yesterday.

Based on the annualised first half earnings of IOI Prop's current financial year of 22 sen a share, the offer price of RM2.598 translates to a price-earnings ratio of 11.8 times, comparable to peers listed on Bursa Malaysia.
In August 2008, IOI Prop completed a rights issue to raise funds for its land development in Sentosa Cove, Singapore.

Close to 94 per cent of the total rights issue offered to all shareholders was subscribed by IOI Corp at RM4.85 per share, which contributed to an increase in IOI Prop's net tangible asset.

IOI Prop's obligations to its Singapore joint ventures in Sentosa Cove amounts to S$1.5 billion (RM3.6 billion).

In privatising IOI Prop, IOI Corp's cash outlay is RM64.3 million. If IOI Corp's RM2.598 offer is completely in cash, the outlay would balloon to RM506 million.

Given the current economic conditions and the need to conserve cash, IOI Corp cannot justify such a large cash outlay.

In the recent rights issue of IOI Prop, IOI Corp had already committed RM737 million in cash outlay.

There is high liquidity in IOI Corp's shares. It is easy for minority shareholders to convert their IOI Corp shares to cash, if they wish to.

AmInvestment Bank said to date the level of acceptance from IOI Prop's minority shareholders, including retail shareholders, had been strong.

By Business Times