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CDL moves to take M&C private
THE market had speculated about it for years, and on Monday, Singapore-listed CDL finally came out into the open, unveiling plans to buy the remaining shares in its majority-owned Millennium & Copthorne Hotels plc (M&C).
CDL, which is led by executive chairman Kwek Leng Beng, said it is looking to offer M&C shareholders 552.5 pence in cash for each share, in a deal which values M&C at £1.8 billion. The possible offer is made up of 545 pence in cash, and a special dividend of 7.5 pence per share when the offer becomes wholly unconditional.
The company is required either to announce a firm intention to make an offer or to announce that it does not intend to make an offer for M&C by 5pm on Nov 6, 2017.
Based on 552.5 pence a share, the offer represents a premium of about 24 per cent to M&C's closing price of 446.7 pence on Aug 18, 2017, the last business day prior to the date on which an initial proposal was received by M&C from CDL.
It is also about 21.4 per cent over M&C's closing price of 455 pence on Friday.
News of the proposal sent M&C shares surging 97 pence to around the offer price on the London Stock Exchange (LSE). In Singapore, CDL closed at S$11.75 a share, up 15 Singapore cents, or 1.3 per cent. More than four million CDL shares changed hands.
The independent directors of M&C, who have been advised by Credit Suisse, said they considered the terms of the offer to be "fair and reasonable". They intend unanimously to recommend the proposed offer to M&C shareholders, subject to finalisation of the other terms and conditions.
CDL, which owns 65.2 per cent of M&C, says it intends to maintain M&C's business model, in particular to run the business as an owner and operator of its hotel portfolio. It also confirmed it has no intention to sell or repurpose any of M&C's hotels in London or in New York.
M&C's history with the Singapore property tycoon can be traced back to the 1990s when depressed real estate and tourism markets provided opportunities for the group to build its hotel portfolio at low prices.
It was formed in 1995 when Mr Kwek's Hong Leong business bought Copthorne Hotels for £219 million from Aer Lingus. Following the acquisition of Copthorne, CDL launched a new hotel brand, Millennium. A year later, it spun off its 23 non-Pacific region Millennium and Copthorne hotels into a new company, M&C, which was floated on LSE.
Today, M&C is one of the largest hotel owners and operators in the world, with over 130 hotels across 17 countries, including the gateway cities of London, New York, Paris, Auckland, Dubai, Beijing and Singapore.
Armed with some S$3.3 billion in cash and cash equivalents, CDL had been expected by many analysts to eventually make the move on M&C.
"People have been talking about CDL taking over M&C. It makes sense for CDL. As a listed company, M&C is answerable to minority shareholders. Buying them out will provide CDL more direct control and more influence on operations," said a market observer.
The offer is seen as attractive for CDL, given that M&C's net asset value (NAV) per share at the end of 2016 was 821.59 pence.
"We see CDL's potential cash offer for M&C as a masterful stroke and, if successful, will almost certainly be accretive for the group," Eli Lee, senior investment analyst at OCBC Investment Research told The Business Times.
Mr Lee noted that the outlook for hospitality assets was broadly turning positive, given the green shoots in the global economy.
"In addition, CDL already indirectly owns a substantial 65.2 per cent stake in M&C, and intimately understands its expansive hotel portfolio and business model as an owner and operator. Against this backdrop, it makes sense for CDL to fully consolidate its hotel subsidiary - if the right price can be agreed upon."
Mr Lee said while the potential cash offer price was fairly attractive for CDL, it also offers M&C shareholders a valuable opportunity for liquidation at a sizeable 21.4 per cent premium to the last closing price on Oct 6.
Deutsche Bank and HSBC Bank are acting as financial advisers to CDL.