IOI to Relist Property Arm in $4.9 Billion Malaysia Spin Off

IOI Corp., Malaysia’s second-biggest palm-oil producer by market value, said it plans to spin off its property assets to unlock shareholder value as the unit expands abroad.

The planter will inject real estate and land into a new company called IOI Properties Group Sdn., which would list on the Kuala Lumpur stock exchange, according to a regulatory filing today. It would have 3.287 billion shares with an estimated value of at least 4.46 ringgit each, the filing showed. That would value it at 14.7 billion ringgit ($4.9 billion).

“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 Corp., based in Putrajaya, Selangor state, has a 26-year track record in real estate starting out in township development in Malaysia, according its website. The group generated 584 million ringgit, or 24 percent of its operating income, from its property and hotels operations in the financial year ended June 2012, according to data compiled by Bloomberg.

“To be honest, when IOI Corp. was doing well we neglected the property division,” Chief Executive Officer Lee Shin Cheng told reporters today in Putrajaya, outside of Kuala Lumpur. “Our listing is going to benefit our shareholders, because IOI’s property is on a stronger footing today.”

The property business is expected to generate an operating profit of at least 1 billion ringgit in the next three years from developments in Malaysia, China and Singapore, said Lee.

Share Distribution

IOI Corp. plans to sell 12.7 billion ringgit of real estate and land to IOI Properties in exchange for stock in the new company, which it plans to distribute on a one-for-three basis to the plantation group’s existing shareholders, the filing showed. It would get additional shares in lieu of 1.8 billion ringgit of debt. The deal also includes an acquisition of 196.3 million ringgit worth of assets from companies controlled by Lee, according to the statement.

A restricted offer for remaining shares would be made, it said. The listing exercise may be completed by the end of 2013, according to Lee, who said he would be chairman of both companies and appointing separate CEOs.

Different Businesses

The demerger comes four years after IOI Corp. bought out and delisted its real estate unit. After restructuring, IOI Corp. would focus on its main 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. rose 2.4 percent to 5.46 ringgit, the highest close since February 2012. The stock earlier rose as much as 6.9 percent to 5.70 ringgit. Its shares have risen 5.4 percent over the past year, underperforming a 14 percent gain in the benchmark FTSE Bursa Malaysia KLCI Index.

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

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