UIC makes unconditional $762m offer for SingLand

[SINGAPORE] United Industrial Corporation (UIC), a company controlled by veteran banker Wee Cho Yaw and Philippine tycoon John Gokongwei, said that it was taking its 80.36 per cent subsidiary, Singapore land (SingLand), private at $761.67 million.

It has proposed an unconditional voluntary cash offer to acquire all the shares it does not already own in SingLand at $9.40 per share in cash, according to its offer announcement.

The news sent shares of SingLand leaping by as much as 11.8 per cent to $9.45 after its trading halt was lifted, before closing at $9.42 yesterday with 836,000 shares changing hands. Shares of UIC closed 5.4 per cent higher at $3.11.

Though SingLand's share price was bid up above the offer price, observers say UIC is unlikely to revise the offer price, given that SingLand's current free float of 19.5 per cent, of which 8.16 per cent is held by US-based equity fund Silchester International Investors LLP, means that only 1.4 per cent of acceptances from minority shareholders is required to cross Singapore Exchange's listing threshold of a 10 per cent free float.

Mr Wee and Mr Gokongwei have deemed interests in SingLand through their stakeholdings in UIC of 48.7 per cent and 37 per cent, respectively.

Describing this as a "fair offer", Maybank Kim Eng property analyst Wilson Liew said that the offer price is at a 25 per cent discount to SingLand's revised net asset value (RNAV), compared to the brokerage's assumed 35 per cent discount to RNAV for its target price of $8.20.

Amid poor market sentiment for the residential property segment, several developers are seeing their shares trading at a widening discount to RNAV or book value. SingLand's low trading liquidity warrants a larger discount, some analysts say.

"We aren't seeing much catalyst mainly from the residential exposure perspective. There are also not many projects left on their landbank. Most of the value is still tied to their commercial properties," Mr Liew said. He also noted that there was no significant upside for SingLand's commercial portfolio, which comprises older Grade A and B office units.

One analyst, who declined to be named, differed in his view on the offer premium, saying that "it is not attractive to minority shareholders".

UIC said that the offer price represents a 11.24 per cent premium to the last traded price of SingLand shares on Feb 19 and a 13.87 per cent premium to the volume-weighted average price for the past three months. It factored in the proposed first and final dividend of 20 cents per SingLand share for the financial year ended Dec 31, 2013.

UIC, whose non-executive chairman is Mr Wee, said that it was taking SingLand private in order to have "greater management flexibility to review the operations, management and financial position of the group, and to evaluate various options or opportunities which may present themselves".

The privatisation will also allow SingLand to save on compliance costs of maintaining a listing in view of its low trading liquidity, it added. Average daily trading volumes of SingLand shares have hovered around 0.02 per cent of the total number of issued shares.

"Hence, the offer represents a unique cash exit opportunity for the shareholders of the company to realise their entire investment at a premium over the market prices of the shares up to and including the last trading day," UIC said.

The deal comes in the wake of market speculation about further privatisation of companies controlled by Mr Wee, following UOL Group's proposed exit offer of $2.55 per share for its 82 per cent owned hotel unit, Pan Pacific Hotels Group.

Observers noted that the proposed privatisation of SingLand suggested that there was consensus between Mr Wee and Mr Gokongwei at least where SingLand is concerned. It would be hard to pull off a privatisation exercise for UIC, where Mr Wee and Mr Gokongwei have long been locked in a tug-of-war for control. Mr Wee did not succeed in his $1.15 billion offer in January 2009 for shares of UIC that he did not own.

"This exercise for SingLand makes sense. If you look at the way the parent is held, much of the value of UIC comes from SingLand. To take UIC forward, it makes sense to delist SingLand first before considering where to take UIC," Mr Liew said.

Analysts note that other property players who are closely held by founding family members, such as Ho Bee and Wing Tai, are also privatisation candidates.