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Ong Beng Seng, Wheelock offer $3.50-a-share for Hotel Properties

Market watchers suggest rival offer from Fu family could be in the offing
Wednesday, April 16, 2014 - 06:00

[SINGAPORE] Ong Beng Seng and Wheelock Properties yesterday jointly launched a $3.50-a-share cash offer for Hotel Properties Ltd (HPL), reviving market talk that the company would redevelop its substantive and adjacent assets along Orchard Road.

Announcing the offer on behalf of offer vehicle 68 Holdings, Standard Chartered Bank said 68 Holdings has agreed to buy almost 42 per cent of HPL for about $750 million from Mr Ong, his wife and his associates, and Wheelock, thus triggering a mandatory offer for the rest of the company.

Explaining the deal, 68 Holdings said: "OBS, as the co-founder of HPL, David Ban and Wheelock Singapore have been long-term shareholders of HPL and they share a common vision and strategy for HPL. They have therefore decided to consolidate their shareholdings in HPL so as to be in a position to cooperate and implement their shared objectives for HPL and to enhance value over time."

Yesterday's announcement said 68 Holdings has agreed to acquire 41.91 per cent of HPL, comprising 213.98 million shares at $3.50 each. Of this, 18.44 per cent is from Mr Ong and two companies controlled by him, Reef Holdings and Como Holdings, and 20.16 per cent from Nassim Developments. The remainder is from Mr Ong's wife, Christina; and David Ban and his wife, Pat.

The offer vehicle is 60 per cent owned by Cuscaden Partners Pte Ltd and 40 per cent by Nassim Developments. Cuscaden, in turn, is 90 per cent owned by Mr Ong. Mr Ban owns the rest. Nassim Developments is an indirect wholly-owned subsidiary of Wheelock Properties (Singapore).

Mr Ong, who is managing director of HPL, had set up HPL with his late father-in-law, Peter Fu Yun Siak. Mrs Ong and her three sibilings Peter Fu Chong Cheng, David Fu Kuo Chen and Juanita Fu Su Ying have a deemed interest of about 21.7 per cent in HPL. Mr Peter Fu Chong Cheng has an additional stake of about 7.1 per cent deemed interest, taking his total stake to nearly 29 per cent.

Interestingly, apart from Mrs Ong, yesterday's announcement did not indicate whether 68 has received an undertaking from the Fus to accept the offer.

The offer will be conditional on the consortium securing more than 50 per cent of the company.

Yesterday, Wheelock was up 7 cents at $1.815. HPL rose to $3.53 from $3.13 last Friday. Trading was halted on Monday. Some 2.96 million shares changed hands. Although this is a sharp increase from last Friday's 77,000 shares, they represent just 0.6 per cent of the issued shares.

Market watchers said this could be a sign shareholders are waiting for the independent financial adviser's view. Or perhaps they believe a counter-offer could be made - from the Fu family that owns nearly 29 per cent of HPL. A clearer picture could emerge in the days and weeks ahead.

68 Holdings intends to retain HPL's listing; however, if the free float falls below 10 per cent, it will reassess its options.

Gaining majority control would make it easier for the consortium to realise HPL's potential. The announcement immediately revived talk of HPL eyeing redevelopment of its adjoining assets in Orchard Road - the Hilton and Four Seasons hotels, Forum the Shopping Mall and HPL House. There was previously even speculation that HPL could persuade the authorities to sell to it the Angullia public carpark next door for a bigger redevelopment. Wheelock Place, an office and retail property, is separated from HPL's assets by the Angullia carpark.

Since Wheelock bought a stake in HPL in 2006, speculation has been rife that Wheelock could partner HPL to redevelop HPL's Orchard Road assets.

Wheelock estimates the gain on disposal of its HPL shares at $40.15 million. Its total cost of the shares is understood to be about $1.86 per share.

Cuscaden Partners and Nassim Developments each has the right to require 68 Holdings to effect a pro-rata in-specie distribution of all its assets to its shareholders on or after the fifth anniversary of the close of offer. If a deadlock occurs, each of them will have the right to require 68 Holdings to effect a distribution in-specie of all its assets to its shareholders on a pro-rata basis.