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Biggest construction group emerges from merger

By Izwan Idris & Susan Tam Malaysia Star


PETALING JAYA: Shareholders of IJM Corp Bhd and Road Builder (M) Holdings Bhd yesterday voted for the merger of the two rivals to create the country's biggest construction group.

The deal, pending approval from market regulators, would create an enlarged construction group with a market value of RM7bil and assets in highway concessions, port operations as well as power and water infrastructure from Argentina to Vietnam.

The enlarged group would have a combined order book of more than RM5bil with construction jobs in India, the Middle East and at home.

“At some point we may have to take these (infrastructure) assets to the market,'' IJM chief executive officer and managing director Datuk Krishnan Tan Boon Seng said after the company EGM yesterday.

“The question would be the timing of the exercise,'' he added.

Tan said the company aimed to develop the enlarged group's assets to a certain operating level before selling them to investors.

IJM owns five highway concessions in India and is looking to list the operation this year.

Meanwhile, the merger with Road Builder would add two local highway concessions to the group and two port operations in the east coast.

IJM had recently taken up a 50% stake in the 48km Kajang-Seremban Highway (Kaseh). Construction of the highway is expected to be completed by 2009.

The company is also in talks for a stake in Kumpulan Europlus Bhd, pending finalisation of the details on the West Coast Highway project.

Inevitably, IJM's aggressive expansion would increase its debt burden and limit its capability to raise funds for future projects.

Tan said the acquisition of Road Builder would increase the group's gearing to 0.76 times, but added that the level was “manageable for a group of IJM's size.”

“We hope to complete the acquisition by the middle of this year,'' he said.

The deal valued Road Builder at RM1.56bil, which IJM would pay via the issuance of 273 million new IJM shares to Road Builder shareholders.

“The market has reacted positively to the transaction and it would be earnings accretive for IJM in the medium to longer term,'' Tan said.

Shares in IJM have surged 35% since the group announced plans to take over Road Builder in mid-October last year. The stock closed 10 sen lower at RM8.60 yesterday, after hitting a fresh high of RM8.80 in intra-day trade.

Road Builder's share price has risen 47% over the past three months to RM4.04 yesterday

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