Accordia Golf Trust offered S$804.1m by sponsor to divest all its Japan golf courses

THE sponsor of Accordia Golf Trust (AGT) has proposed to acquire the trust's 88 golf courses in Japan for 61.8 billion Japanese yen (S$804.1 million), or an implied purchase consideration of S$0.732 per unit, it said on Monday.

The price represents a premium of 5.1 per cent and 12.9 per cent over AGT's adjusted net asset value of S$764.9 million and adjusted net tangible assets of S$712.3 million as at March 31.

The price also represents a premium of 21.8 per cent over the volume weighted average price of AGT units in the one month prior to and including the closing unit price of S$0.60 on Nov 27, 2019. That was the day before AGT announced that it had received a non-binding proposal to buy over its interests in all its golf courses.

Sponsor Accordia Golf plans to acquire all membership interests in, and assume the debts, of Accordia Golf Asset Godo Kaisha (SPC), the holding company which holds the golf courses. AGT will thus receive the full consideration of S$804.1 million from Accordia Golf and will not need to apply any of this amount towards the repayment of the SPC's debts.

AGT said it intends to distribute the net proceeds from the proposed divestment via special distributions, after setting aside fees and expenses that are expected to comprise 3 per cent of the S$804.1 million purchase consideration.

The special distribution will be paid in two tranches. The first, comprising 92 per cent or 56.9 billion yen, will be paid within 25 business days of Accordia Golf's payment to AGT.

If there are no claims by Accordia Golf against AGT, another 5 per cent that had been set aside for potential claims will be paid out later.

It will not be meaningful for AGT to maintain its listing on the Singapore Exchange (SGX) after the asset sale, the trustee-manager noted, as AGT will cease to have any operating business and will be deemed to be a cash trust.

The trustee-manager thus intends to undertake a voluntary winding up of AGT.

The proposed acquisition is conditional upon approval from AGT unitholders by Sept 14, at an extraordinary general meeting (EGM) to be convened.

Sponsor Accordia Golf, which holds 28.85 per cent of all units in AGT and 49 per cent of the shares of the trustee-manager, will abstain from voting on the resolution related to the proposed acquisition at the EGM.

CIMB Bank has been appointed as the independent financial adviser (IFA) for the purposes of the proposed divestment as an interested person transaction. The IFA's opinion will be set out in a circular to be despatched to unitholders.

AGT's independent committee said on Monday that AGT's trading volume on the SGX has been historically low, so the proposed divestment enables unitholders to realise value for their units now.

AGT has not made any acquisitions to drive growth since its listing, they added. While the SPC had from time to time, evaluated suitable golf course acquisitions, it was difficult for the SPC to raise accretive financing to make the acquisitions. Consequently, it never proposed any acquisitions to the trustee-manager, the independent committee said.

"AGT may face further difficulty in obtaining financing for golf course acquisitions (as a result of the Covid-19 outbreak), limiting AGT's ability to improve its distribution per unit (DPU)," AGT said in a statement.

Accordia Golf also noted that AGT's historical DPU has fallen over time and the offer by it to buy out AGT's golf courses represents an opportunity for unitholders to cash out.

Hibiki Path Advisors, the largest minority unitholder of AGT with a 7.2 per cent stake, told The Business Times on Monday: "At our first sight, we are not impressed with the offer price of S$0.732 and are exploring the details announced by AGT."

Originally, AGT said last December that Accordia Golf's indicative offer for the golf course holding company was 63.2 billion yen (S$781 million), or roughly S$0.71 per unit.

So Monday's offer is lower in yen terms, but the yen has since strengthened against the Singdollar to make up for it.

AGT declared a S$0.0169 dividend on June 11 that was paid on Monday. It has also promised to pay an additional 1.2 billion yen or roughly S$0.0142 per unit in operating reserves to unitholders at a later date.

AGT said that the offer submitted by Accordia Golf was the only definitive offer it received. While a third party bidder had undertaken extensive due diligence on AGT and its golf courses, this party eventually withdrew from the process due to, among other reasons, the Covid-19 outbreak and its effect on the golf course industry, AGT said.

Travis Lundy, an analyst who publishes on Smartkarma, said: "Given the dearth of buyers of Japanese golf courses out there, and the general weakness of Reits and trust assets in Japan, I don't expect others to show up, so I expect no bump and no competitive bid."

Accordia Golf Trust called for a trading halt on Monday morning before the offer was announced. The units last changed hands at S$0.64 last Friday.

AGT has been speculated as a privatisation candidate ever since South Korean private equity firm MBK Partners acquired its sponsor and golf course operator Accordia Golf in 2016.

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