From Ibrahim M Ahmad

There is little dispute about one point. Sunway Berhad is a strong operator. Its 10-year total shareholder return of about 387% speaks for itself. Its margins are higher. Its execution track record, particularly through its recent “3X” transformation push, has been credible and visible in the numbers.

So when Idris Jala argues that Sunway can lift IJM Corporation Berhad and create a bigger, more competitive platform, that argument is not without merit. But that is not the central question in a takeover.

The central question is simpler, and more uncomfortable: Is RM3.15 per share a fair price for IJM today?

Sunway’s offer is framed as attractive because it represents roughly a 28% premium to IJM’s market price. On the surface, that sounds compelling. But a premium to market price is not the same as fair value.

Markets can misprice companies. Stocks can trade below what they are actually worth, especially when assets are long-term in nature or not fully appreciated by the market.

Intrinsic value

This is why takeovers are not judged purely on trading prices. They are judged on intrinsic value.

And here, the independent adviser appointed for the transaction assessed IJM’s value in a range of RM5.84 to RM6.48 per share, while another independent view placed it between RM4.80 and RM5.63.

Against that backdrop, RM3.15 does not look like a generous premium. It looks like a significant discount.

Performance and price

A key plank of the argument is Sunway’s superior performance. Over a decade, RM1,000 invested in Sunway would have grown to about RM4,870. The same investment in IJM would have declined slightly.

That is an important fact. But it does not answer the valuation question. A company’s past performance explains why its own shares are valuable. It does not determine what another company should accept when selling control.

In fact, the logic cuts the other way.

If Sunway is truly better at extracting value, then IJM becomes more valuable in its hands. And if that is the case, then the price should reflect that potential, not ignore it.

Case for a higher price

Idris points to potential synergies, including the ability to lift IJM’s profit margins from about 11.5% closer to Sunway’s 18%. Even a partial improvement, he suggests, could unlock around RM300 million in additional annual profit.

That is a powerful argument for the transaction. But it is also a powerful argument about value. Because if that upside exists, the question becomes: Who should benefit from it?

If IJM shareholders are handing over control today, it is reasonable for them to expect that future upside to be reflected, at least in part, in the price they receive. Otherwise, most of that value accrues to the acquirer.

A premium isn’t protection, it’s payment for value upfront. This is where the debate is often misunderstood. The issue is not about shareholders wanting more for comfort. It is about when value is realised.

When IJM shareholders accept an offer, they are giving up control of the company; future upside from synergies; and the ability to realise that value themselves over time.

In return, they should be paid for that value upfront, not merely promised it later. This is why takeovers typically include a control premium. It is not a bonus. It is compensation for handing over future value today.

Shifting risk

In this case, much of the argument rests on what Sunway can achieve after the acquisition: higher margins, better execution, stronger growth. But if that future upside is real, then the question follows naturally: why is that value not more fully reflected in the price today?

Otherwise, IJM shareholders are effectively being asked to exchange a known asset for a future promise, while the acquirer captures a disproportionate share of the upside.

The offer is not just about price, it is also about structure. Only 10% of the consideration is in cash, the remaining 90% is in Sunway shares. This means IJM shareholders are not fully exiting. They are effectively reinvesting into Sunway at a valuation set by Sunway.

They are being asked to: accept Sunway’s valuation today, depend on Sunway’s future execution, and continue bearing market risk.

Such structures can work when both sides are aligned on value. But when there is already disagreement on valuation, the structure becomes more contentious. It shifts risk without necessarily sharing reward equally.

Targets and valuations

Sunway has pointed to a broad range of research house target prices, clustering around RM2.60 to RM3.50, with an average close to RM3.13. This is presented as evidence that RM3.15 is fair.

But there is an important distinction. Research targets are designed for trading decisions. They do not typically include a control premium or fully reflect strategic synergies.

A takeover is different. It involves transfer of control, access to future synergies and long-term strategic positioning.

These factors often justify paying above market-derived estimates. So comparing the offer solely against research targets risks understating what is actually being acquired.

The broader vision is compelling. A combined Sunway-IJM platform could be larger, more competitive, and better positioned to expand internationally. It could contribute to Malaysia’s ambition to build stronger global companies.

But strategy cannot override price discipline. A national champion built on undervaluing one set of shareholders raises its own questions. Commercial transactions must stand on their own terms.

For a young investor, the issue can be reduced to this: if something is worth about RM6, and someone offers RM3, even if they promise to make it worth RM10 later, you would still ask “Why should I sell it to you at RM3?” That is the essence of the debate.

The real divide

This is not a dispute about whether Sunway is a capable company. It is. It is not even a dispute about whether the combination could create value. It probably can.

The divide lies elsewhere, between a buyer confident in its ability to create future value and a seller asking whether that future value is being fairly paid for today.

Until those two views align, the transaction will remain contested. And that, more than anything else, explains the resistance.

Ibrahim M Ahmad is an FMT reader.

The views expressed are those of the writer and do not necessarily reflect those of FMT.