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Far East Consortium's acquisition of controlling stake in Eagle Hospitality Trust falls through

HONG Kong-listed property conglomerate Far East Consortium International (FECIL) will not be proceeding with the proposed acquisition of a controlling stake in Eagle Hospitality Trust’s (EHT) manager, EHT's manager said in a regulatory filing late on Thursday.

On June 3, EHT had announced that FECIL had inked a non-binding conditional proposal with Urban Commons. FECIL was to acquire 70 per cent in both EHT's Reit manager and its trustee-manager.

The proposed transaction would have involved FECIL subscribing to one convertible preferred share (CPS) in each manager. These CPSs would then be converted to ordinary shares in the managers upon the fulfilment of certain conditions including some relating to the restructuring and recapitalisation of EHT.

There would also be further subscriptions by FECIL of shares in the managers at the time of the conversion of the CPS such that FECIL will have a 70 per cent stake in each of the managers.

Since then, however, no definitive agreement has been signed in respect of the transaction.

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EHT's trustee, DBS Trustee, has now directed its financial adviser Moelis & Company to commence a request for proposal (RFP) process “on an expedited basis” from parties interested to enter into a deal with EHT.

Under the RFP process, interested parties will have to submit their preliminary indication of interest by July 31. The trustee and Moelis expect that formal bids will have to be submitted by the end of August. 

Singapore Exchange Regulation (SGX RegCo), the regulatory arm of SGX, has required that all bids under the RFP process are to be considered without any restrictions on the eligibility of parties to participate. 

The regulator has also directed that Howard Wu and Taylor Woods, formerly non-independent non-executive chairman and deputy chairman of EHT’s manager, should not be negotiating with any bidder exclusively. 

This is following the discovery of "prejudicial" interested-person transactions in the form of agreements between the duo and master lessees involved in the trust’s hotel assets.

Mr Wu and Mr Woods, who are also co-founders at Eagle Hospitality Trust's (EHT) current sponsor Urban Commons, announced their resignations from EHT’s manager shortly after the discovery of the transactions. They continue their roles at Urban Commons. 

The transactions were noted to be prejudicial to the interests of EHT and its minority stapled security holders. 

EHT has come under close scrutiny by the authorities, and is currently the subject of a joint investigation by the Monetary Authority of Singapore (MAS) and the Commercial Affairs Department (CAD) of the Singapore Police Force. 

The probe is in connection with suspected breaches of disclosure requirements under Section 203 of the Securities and Futures Act, and stems from a referral by SGX RegCo.

Trading of EHT stapled securities has been suspended since March 24, 2020.

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