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IJM Land Bhd and Malaysian Resources Corp Bhd (MRCB) plan to merge via a share swap in a newly incorporated company that is slated to emerge as the nation’s second-largest property developer.

Yesterday the two companies signed a memorandum of understanding (MoU) and planned to come up with a definite agreement within three weeks.

The merger will involve a share-swap whereby the shares of IJM Land and MRCB will be exchanged for shares in the new company.

The exchange price per IJM Land share is RM3.65 and RM2.30 per MRCB share. This will translate into a premium of 27.5% and 10.2% for IJM Land and MRCB respectively to the five-day volume weighted average market price.

Post merger, IJM Land and MRCB plan not to maintain their listing status and the new company will take over their listing status by June 2011. IJM Land’s market capitalisation is currently at RM3.4bil while MRCB’s is about RM3bil.

MRCB CEO Mohamed Razeek Hussain said the MoU was only the first step of the merger where they would reveal further details of the agreement, such as shareholding structure and share swap ratio for the merger, in three weeks’ time.

But because of rife speculation of the merger in the media, we think it will be fair to announce that both companies are in discussion and have signed an MoU pursuant to the merger. We are not ready to give the plethora of arrangement just as yet, he said after the MoU signing yesterday.

Meanwhile, IJM Land chairman Datuk Krishnan Tan said the two companies complement each other via the merger.

It’s a merger between businesses, people and branding to take both companies to the next level. It’s a good marriage, he said.

MRCB specialises in high-rise development office and condominiums while IJM Land projects are slanted towards mass township of mixed developments.

According to a presentation revealing some preliminary details of the merger, the new company is anticipated to be a mega-size property developer with implied market valuation of RM7bil, combined annual revenue of RM2bil and net asset of RM3bil, landbank in excess of 9,000 acres and increase in geographical presence.

AmResearch said the merger between MRCB and IJM Land made sense.

IJM Land could leverage on MRCB’s advantage in Sungai Buloh land. MRCB has been assisting the EPF in drawing up the masterplan for the redevelopment of the RRI (Rubber Research Institute) land (in Sungai Buloh).

The research house added that IJM Land would bring expertise and a strong track record to the partnership as MRCB lacked experience in township development.

Separately, OSK Research said the merger would boost synergy and economies of scale. We believe the combined entity will stand a strong chance of being appointed the master developer of the prized piece of federal land at RRI.

However, Krishnan said the purpose of the merger was beyond any specific project and was more towards complementing each other and to be more competitive.

MRCB’s largest shareholder is the EPF while IJM Land is a unit of IJM Corp Bhd, a construction and plantation group.

On Nov 4, UEM Land Holdings Bhd made a RM1.4bil takeover offer for Sunrise Bhd that would make it the largest developer of the country.

IJM Land, in its filing to Bursa Malaysia, said its net profit fell by 19.4% to RM30mil for its second quarter ended Sept 30 from a year ago. Revenue for the quarter under review also fell by 30% to RM212.9mil.

The decrease in both revenue and net profit for the quarter was due to strong take-up rate achieved in the preceding quarter for Lot 28 in Penang and sale of units (Platino and Summer Place in Penang) previously reserved for bumiputra being offered to the public.

However, cumulatively, for first six months of the current financial year, IJM Land saw its net profit surged by 30.8% year-on-year on the back of RM577.9mil of revenue.

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XOX Bhd is planning to raise about RM40 million in its initial public offering (IPO), making it Malaysia’s first full-fledged mobile virtual network operator (MVNO) to be listed on the local stock exchange.

The IPO, which is awaiting the Securities Commission’s (SC) final approval, comes as the stock market has hit record highs and has absorbed mega IPOs like the two units of oil giant Petronas.

It will also test investors’ appetite for MVNOs, mobile phone operators that rent air time from incumbent operators like Celcom Axiata, Maxis or DiGi, which operate in a highly saturated market.

But MVNOs target a niche that is either neglected or difficult to enter by incumbents. For XOX, its expertise lies in the urban Chinese market.

XOX’s prospectus is expected to be launched in December or the first quarter of next year. AmInvestment Bank is arranging the IPO which involves 53 million new shares.

“We are very excited about the IPO. Hopefully we can get the SC approval soon,” chief executive officer Ng Kok Heng told Business Times in Petaling Jaya, Selangor recently.

It will use the money for marketing, working capital as well as to upgrade infrastructure and equipment.

Ng believes the IPO could help XOX realise its full potential.

“As an MVNO, we are the thickest because we offer a full range of service. We have voice and we also have third-generation (3G) data services that are very close to the services provided by the incumbents.

“Later, we plan to add on more things for our customers such as contents. We hope to offer more than what the incumbents are offering,” Ng said.

An MVNO is a company that offers mobile phone services like phone calls and text messaging, but does not have its own licensed frequency allocation of radio spectrum. Nor does it necessarily have all the infrastructure to provide mobile telephone services.

In XOX’s case, it offers the services by riding on Celcom Axiata Bhd’s network.

Malaysia now has four MVNOs which are Tune Talk Sdn Bhd, Merchantrade Asia Sdn Bhd and REDtone International Bhd. Although REDtone is also listed, its main business is not solely focused on MVNO, as it also offers services like broadband and discounted calls services for business owners.

XOX now has more than 250,000 customers, with customers spending an average of RM27 a month.

Recently, the company unveiled its Hybrid package – which basically combines both prepaid and postpaid features. Its prepaid customers can have a credit limit beyond what they have preloaded.

“We have a convergence charging system. As for the credit limit, we are very prudent about it and we have the mechanism to extend the credit limit for the serious and genuine customers,” said Ng.

Its Hybrid package has more offerings, including transferring of credits among numbers within the family package as well as data services.

“This means, if a father and son use the package, the father can monitor the son’s usage and mobile spending. When the son runs out of credit, he doesn’t have to go out and buy a reload card. All he can do is transfer from his credit.

“So, we are basically targeting two groups of people. The prepaid segment, as well as the postpaid customers who want the convenience,” said Ng.

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Time dotCom Bhd (TdC) has proposed to buy three companies for RM339mil in its bid to be a regional telecommunications player.

The three companies are AIMS Group which will be acquired for RM128mil, of which RM38.4mil will be in cash; Global Transit Communications Sdn Bhd (GTC) for RM106mil in stock; and Global Transit Ltd (GTL) for RM105mil, of which RM52.5mil will be in cash and the balance in shares.

“We were looking to expand our presence and we felt that these three companies offered us very unique opportunities to expand into extremely niche markets,” TdC chief executive officer Afzal Abdul Rahim said at a briefing to announce its corporate exercise yesterday.

GTC is a leading regional wholesale Internet service and backhaul provider, GTL owns 10% in the trans-Pacific Unity North Cable System while AIMS is a leading “carrier hotel” (a type of data centre) in Malaysia.

Time dotCom Bhd chief executive officer Afzal Abdul Rahim (left) and director Balasingham Namasiwayam (right) at a media briefing to announce its corporate exercise on Tuesday. Afzal said: “‘These three companies offered us very unique opportunities to expand into extremely niche markets.”

In total, the acquisitions will be financed by RM90.9mil in cash and RM248.1mil in shares, and are expected to be completed in six months.

TdC has also announced a capital repayment of 2 sen per share, or a total of RM50.6mil, while rationalising its balance sheet by writing off part of its share capital that is not represented by available assets.

“It’s very rare that you find, for example, a submarine cable that’s up for sale, especially one that has such high capacity,” Afzal said, explaining the acquisition.

“This marks TdC’s transformation into a regional telco player and we see these acquisitions as value boosters that make good business sense,” said TdC senior independent director Ronnie Kok Lai Huat.

“We will now have the capacity to deliver higher value products and services throughout Asia at competitive prices through a company based in Malaysia.

“From purely providing telco infrastructure services, TdC now moves into a new arena of owning and selling capacity as well as managing telco connectivity traffic. We are leapfrogging over our competition,” Kok added.

To a question, Afzal said he expected “significant enhancement” of the company’s business and operations following the acquisitions.

He explained that owning a stake in the 9,620km Unity submarine cable would allow TdC to lower its costs while strengthening its wholesale offering.

The submarine cable was built together with Google Cable Bermuda Ltd, Bharti Airtel Ltd, KDDI Cooporation, Pacnet Ltd and Singapore Telecommunications Ltd, all of which are shareholders of the system.

“Apart from selling services to other service and Internet service providers and telcos, our customer base is made up of a lot of large enterprises and corporations, and this allows us to service their regional needs,” Afzal said.

The acquisitions were expected to increase TdC’s earnings per share “almost immediately”, Afzal said, adding that the group had a 5% share of the local market. “We’ll start seeing the results in 2011,” he said.

In a statement to Bursa Malaysia, TdC said the purchase considerations were arrived at on a willing-buyer willing-seller basis after taking into account the earnings potential from the businesses of the three companies.

The purchase price was also determined by “evaluation assistance” from UBS Securities Malaysia and independent advice provided by Public Investment Bank Bhd.

The price of the new TdC shares that will be issued to the vendors of the companies is 72.3 sen each, based on the five-day volume-weighted average market price of TdC shares.

The main vendor of the companies is Megawisra Sdn Bhd.

Megawisra and the persons acting in concert intend to seek a waiver from the Securities Commission from having to undertake a mandatory general offer of TdC shares not held by them upon completion of the proposed exercise.

Afzal owns 75% of Megawisra Investments, the holding company of Megawisra.

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