CDL launches new bid for M&C at improved 685 pence a share

Singapore

MAINBOARD-listed City Developments has launched a renewed takeover bid for its London-listed subsidiary Millennium & Copthorne Hotels - this time with a higher cash offer of 685 pence per share, up from the previous 620 pence bid in December 2017 that was subsequently blocked by M&C's minority shareholders.

CDL's latest offer values M&C at £2.23 billion (about S$3.86 billion). The new offer price represents a premium of about 37 per cent to M&C's closing price of 500 pence, based on the counter's closing middle market price on June 6.

CDL currently owns 65.2 per cent of M&C. The latest offer price for the remaining 34.8 per cent of M&C shares is "final and will not be increased", CDL said in an announcement late on Friday night. The property developer will pay a maximum cash consideration of £776.29 million (about S$1.34 billion). This will be funded through internal cash resources and funds made available to CDL under a credit facility.

CDL, its indirect wholly-owned subsidiary Agapier Investments and the independent directors of M&C have reached an agreement on the terms of the final offer, where Agapier will acquire the remaining M&C shares not already held by CDL.

In January last year, CDL's attempt to take M&C private failed after insufficient numbers of minority shareholders supported the acquisition. CDL had secured acceptances from only 47.14 per cent of the London-listed hotelier's minority shareholders, short of the 50 per cent threshold for the bid to become unconditional.

This time, however, CDL said that it has already secured irrevocable undertakings for 49.3 million M&C shares, translating to 43.6 per cent of the M&C shares the CDL does not own. The minority shareholders that have provided the undertakings are JNE Partners, MSD Capital, International Value Advisers, Classic Fund Management and BWM. Notably, International Value Advisers, MSD Partners and Classic Fund Management had previously criticised M&C directors in 2017 for backing CDL's initial offer price of 552.5 pence a share.

M&C's independent directors intend to unanimously recommend that M&C shareholders accept the latest offer, CDL added in its announcement. The M&C independent directors, who have been advised by Credit Suisse, consider the terms of the latest offer fair and reasonable.

Privatisation is the ideal route for M&C given that it would "require significant and targeted capital investment to reposition assets as part of its long-term strategy" in the highly-competitive landscape, CDL said.

"Taking M&C private is in line with CDL's strong focus on boosting recurring income and enhancing underperforming assets. We are pleased to have garnered the support of M&C's independent directors and key minority shareholders. The offer enables shareholders to exit an illiquid stock at a significant premium," said CDL chief executive Sherman Kwek in a press statement.

"We believe that a privatised M&C will be in the best position to navigate the increasingly challenging and competitive global hospitality landscape with agility and nimbleness. M&C will be able to leverage CDL's significant resources, comprehensive real estate capabilities and global network to reposition its assets and drive sustainable hotel performance," he added.

The offer will be subject to CDL securing at least 50 per cent of the M&C shares it does not already own. It will also be subjected to a New Zealand Overseas Investment Office (OIO) Pre-Condition, given that M&C owns land in New Zealand.

When the final offer becomes unconditional, M&C will apply for delisting from the London Stock Exchange. If M&C declares any dividends after June 7, the final offer consideration will be reduced accordingly.M&C shareholders would be entitled to retain the dividend.

If the latest offer succeeds, CDL said that it will work with M&C to "identify opportunities to improve the operating and financing efficiency of its hotels by leveraging on CDL's infrastructure, network, financial resources and execution capabilities".

However, given these operational challenges, CDL believes that it will have to become increasingly involved in the operational and financial management of M&C. It intends for M&C to continue to own, lease, manage, franchise, invest in and/or operate hotel assets across a wide geographical landscape, the company said.

CDL will publish the offer document within 28 days following the satisfaction of the OIO Pre-Condition, or if a waiver if permitted by the UK Panel on Takeovers and Mergers.

M&C is a global hospitality management and real estate group headquartered in London with 120 hotels in 79 locations in Asia, Australasia, Europe, the Middle East and North America.

Shares of CDL closed at S$8.47 on Friday, up 16 Singapore cents or 1.93 per cent, before the announcement.

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