KUALA LUMPUR: IJM Corp Bhd’s offer to privatise IJM Land Bhd at RM3.55 per share is “fair and reasonable”, said independent adviser Hong Leong Investment Bank (HLIB).

HLIB recommends that shareholders of IJM Land (fundamental: 2.2; valuation: 1.8) vote in favour of the privatisation exercise, after taking into consideration the valuation of the proposal.

Under the privatisation proposal, IJM Corp (fundamental: 1.6; valuation: 2.4) has valued IJM Land at RM3.55 per share, which will be satisfied by an issuance of 0.5 ordinary shares of IJM Corp at RM6.66 each, plus a 22 sen cash consideration for every IJM Land share.

The total consideration for IJM Corp to take over the remaining 35.85% stake in IJM Land it doesn’t control, is RM1.98 billion.

IJM Land will hold an extraordinary general meeting on Feb 12, 2015, to deliberate the matter.

In an independent adviser letter yesterday, HLIB said the valuation on the fairness of the offer is carried out using the revised net asset value (RNAV) method, a commonly used valuation methodology for valuation of asset-based companies.

It found that the RNAV for IJM Land is RM5.618 billion, which translates into an RNAV per share of RM3.60. Hence the office price of RM3.55 would represent a 1.39% discount.

The independent adviser urged the shareholders to take into account the 22 sen cash consideration, when assessing the fairness of the offer price.

Based on the historical market price of IJM Land shares, the share price had traded below the offer price of RM3.55 for the past three years.

“We are of the view that the proposed privatisation presents an opportunity for the scheme shareholders to exit their investment in IJM Land at a premium to its historical market prices, in exchange for the cash consideration and the IJM Corp shares,” HLIB said.

IJM Land closed two sen higher at RM3.40 yesterday, giving it a market capitalisation of RM5.27 billion.

This article first appeared in The Edge Financial Daily, on January 20, 2015.