IJM ... Nov09

Sources say the US$2.5 billion investment vehicle set up jointly by 1MDB and PetroSaudi Intl Ltd on Sept 30 is looking at acquiring a strategic stake in IJM Corp. That will be the first JV’s first meaningful investment.

According to sources, the JV may acquire the IJM stake from Zeland Bhd, which holds 8.77% stake in IJM as of June 30, 2009. The stake was valued at Rm392 million,

It is not known whether the 1MDB-PetroSaudi JV will acquire more shares in IJM from other parties or on the open market. But sources say the JV’s intention for the acquisition is to tap IJM’s construction expertise, which could be useful for some of the projects it plans to invest in, and not to take over the construction outfit.

As such, the result of such an acquisition is unlikely to lead to a general offer for IJM.

Armed with a US$2,5 billion war chest, the 1MDB-PetroSaudi JV was set up to invest in strategic high impact projects in Malaysia and the region.

Nevertheless, the EPF has since been increasing its stake in IJM to 21.6% currently. Given that it has strengthened its position in IJM as the single largest shareholder, it is unlikely that EPF would want to divest its stake in IJM to 1MDB-PetroSaudi JV.

For IJM, having the 1MDB-PetroSaudi JV on board as a strategic investor apart from EPF, would certainly boost its prospects in terms of participating in more infra construction projects in Malaysia as well as the region.