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IOI to Spin Off Property Arm for Separate Kuala Lumpur Listing

IOI Corp. (IOI), Malaysia’s second-biggest palm oil producer by market value, said it plans to spin off its property assets for a separate listing to boost its profile and unlock shareholder value.

The Selangor-based planter intends to sell 12.7 billion ringgit ($4.3 billion) of real estate and land to IOI Properties Group Sdn. which would list on the Kuala Lumpur stock exchange, according to a regulatory filing today. IOI Corp. would be paid in stock in the new company, which it plans to distribute on a one-for-three basis to existing shareholders, it said.

“This will give more transparency to their property division,” Ivy Ng, an analyst at CIMB Investment Bank Bhd., said by phone. “Once it’s carved out, people will see how well they are doing and give them a proper valuation. In that sense, it’s positive.”

IOI has a 26-year track record in real estate starting out in township development in Malaysia, according its website It’s now expanding abroad, starting with Singapore. The group generated 584 million ringgit, or 24 percent of its operating income, from its property and hotels operations in its last financial year ended June 2012, according to data compiled by Bloomberg.

IOI Properties may list shares at least 4.46 ringgit each, the filing showed. With a proposed total of 3.287 billion shares, that would value the new company at 14.7 billion ringgit, according to calculations by Bloomberg News. A restricted offer for remaining shares would be made, it said.

Raising Funds

The demerger comes four years after IOI Corp. bought out and delisted its real estate unit. After restructuring, IOI Corp. would focus on its core commodities business and hold no direct stake in the property group, even though both listed companies would have some common shareholders.

“The proposed demerger provides a platform for the respective entities to pursue different and a more tailored business strategy,” IOI Corp. said in the statement. Listing the property group will “further enhance its corporate reputation,” helping the developer raise funds and expand its customer base, it said.

IOI Corp. halted shares on May 9 ahead of today’s announcement and last traded at 5.33 ringgit, up 4.1 percent.

AMMB Holdings Bhd., RHB Capital Bhd. and Standard Chartered Plc were appointed joint global coordinators for the proposals, IOI Corp. said.

As part of the plan, IOI Properties would buy 196.3 million ringgit of assets from companies controlled by the group’s Chief Executive Officer Lee Shin Cheng. IOI Corp. would get additional shares in lieu of 1.8 billion ringgit of debt, the filing showed.

To contact the reporter on this story: Ranjeetha Pakiam in Kuala Lumpur at rpakiam@bloomberg.net

To contact the editors responsible for this story: Barry Porter in Kuala Lumpur at bporter10@bloomberg.net; Andreea Papuc in Hong Kong at apapuc1@bloomberg.net

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