Frasers Hospitality Trust privatisation bid falls shy of required 75% approval in scheme meeting

THE bid by the managers of Frasers Hospitality Trust (FHT) to go private has been scuttled, after the Singapore-listed real estate investment trust (S-Reit) failed to garner the mandatory approvals from stapled securityholders at a scheme meeting on Monday (Sep 12).

Some 70.91 per cent of stapled securityholders representing 74.88 per cent of units voted in favour of the proposed scheme.

Of the 227.6 million stapled securities represented by votes, 170.4 million voted to approve the scheme while the remaining 57.2 million voted against.

For the scheme to be passed, the resolution had to be approved by a majority in the number of stapled securityholders representing at least 75 per cent of the total number of units held by those present and voting by proxy.

Various parties including the offeror – a wholly-owned subsidiary of real estate giant Frasers Property Limited (FPL), the sponsor of FHT – and its concert parties, substantial stapled securityholders of FHT and the managers of FHT abstained from voting on the scheme.

“They were defeated by a narrow margin,” FHT stapled securityholder Mano Sabnani told The Business Times (BT). “They fell short of the 75 per cent rule.”

Sabnani, who has been a stapled securityholder of the hospitality-focused S-Reit since its initial public offering (IPO) in 2014, added that the vote came after a “lively discussion” at the scheme meeting.

According to him, the arguments that the managers of FHT had used to justify the privatisation – such as its small size and obstacles in growing distribution per stapled security (DPS) and net asset value (NAV) – were factors that were known since its IPO.

“The arguments are just changed when it suits them. They turn all the arguments on the head and put them across,” Sabnani said. “I was against the (proposed privatisation) from the start.”

The managers of FHT on Jun 13 announced the proposed privatisation, which would see FPL pay S$0.70 in cash for each FHT stapled security that FPL and TCC Group Investments do not already hold.

The move came after FHT in April announced a strategic review to explore various options to “enhance and unlock value” for stapled securityholders.

The scheme consideration price represented a premium of 7 per cent to FHT’s NAV at the time of the announcement.

Since its IPO, it had traded at an average discount of 19 per cent to its NAV. Over the 3-year period to Apr 7 — the day before it announced its strategic review — the Reit traded at a discount to NAV of 25 per cent.

However, the way minority shareholders such as Sabnani see it, the proposed buyout was “opportunistic”.

While the managers of FHT said they had explored other options, including a merger with other trusts, and the sale of its individual assets or the FHT platform to a third party, Sabnani said it seemed “incredulous” that no one offered a better price than the sponsor, given the current market situation.

“The bottom line is still that it is an opportunistic buyout at a low point, when we are at the cusp of a recovery,” Sabnani said. “The (hospitality) industry is in a major recovery.”

He added that the proposed privatisation would likely have been approved by stapled securityholders if the offeror had dangled a higher offer price which would be perceived by minority shareholders to be closer to fair value.

In response to queries from BT, the managers of FHT said it would respect the decision of stapled securityholders and the outcome of the meeting.

“While we believe that the privatisation has its merits, stapled securityholders have expressed their preference for FHT to remain listed and we are heartened by their support and confidence for FHT,” said Eu Chin Fen, chief executive officer of the managers of FHT.

“We shall remain focused to ride on the gradual recovery trajectory and navigate through the challenges and opportunities ahead of us. We continue to stay committed to create and deliver long-term value to our stapled securityholders,” she added.

“We remain committed as the sponsor of FHT and will continue to support FHT in its strategic initiatives,” said a spokesperson of sponsor FPL.