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IFA clarifies recommendation for Wheelock offer

Reworded paragraph omits the words "but not compelling", and makes clear advice to accept offer


PRIMEPARTNERS Corporate Finance, the independent financial adviser (IFA) to the recommending directors, has clarified its advice on the offer to take Wheelock Properties (Singapore) private as "fair and reasonable".

In a clarification letter late on Thursday, the IFA said that due to "market feedback," it wishes to reword a paragraph in its IFA letter "to address any perception of an inconsistency between our opinion and our recommendation to the recommending directors in relation to the offer".

The reworded paragraph was as follows: "Having considered the aforesaid points including the various factors set out in this letter and summarised in this section, we are of the opinion that the financial terms of the Offer are fair and reasonable.

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Accordingly, we advise the recommending directors to recommend that shareholders accept the Offer, unless shareholders are able to obtain a price higher than the Offer Price on the open market, taking into account all brokerage commissions or transactions costs in connection with open market transactions."

The IFA's original recommendation sent last week on the financial terms of the offer to take the company private are "fair and reasonable, but not compelling, and are not prejudicial to the interests of minority shareholders".

When contacted by phone, PrimePartners chief executive Gerald Ong said he had nothing further to add beyond the clarification letter.

Last year, the Singapore Securities Industry Council (SIC) which regulates takeovers and mergers reminded IFAs to be clear and unequivocal in their opinion.

In a February 2017 bulletin, the SIC said: "We would like to remind financial advisers of the need for the IFA opinion to be clear and unequivocal. If an IFA makes a recommendation on an offer, the recommendation should be to either "accept" or "reject."

The recommendation should not be to accept under certain conditions, and to reject under other conditions. Accordingly, recommendations should also not be conditional. This is important to help shareholders, in particular lay investors, understand and rely on the advice."

In its recommendation to accept the offer to take Wheelock private, the IFA said it had considered that the developer's revenue has decreased significantly in the period under review as most of its completed development properties have been sold, and the company has not added any new property development projects during this time.

And even though the offer price of S$2.10 per share is at a 19.2 per cent discount to the company's net asset value (NAV), the IFA said the discount is less than the range of discounts at which the shares had consistently traded at over the one-year period.

In fact, the shares have not traded above the offer price since July 14, 2017, up until the offer announcement date.

In the past one year, the shares had an average daily trading volume of about 634,000 shares, representing about 0.22 per cent of the company's free float.

"While there appears to be a ready market for the shares as indicated by the regular frequency of transactions, the absolute trading volume of the shares is nevertheless very thin, which renders the shares illiquid for investors who wish to undertake transactions in larger amounts of shares," it said.

So far, the offeror - Hong Kong-listed parent Wheelock and Company - and the parties acting in concert with it collectively hold about 76.2 per cent of the shares, and the company has confirmed that there is no alternative or competing offer available to the shareholders.

"As the offeror and parties acting in concert with it have majority control of the company and the offer is unconditional in all respects, the likelihood of a competing offer is remote," the IFA said.

The counter closed on Thursday at S$2.19, up one cent.

The offer will close at 5.30 pm on Sept 7, 2018 or a later date that may be announced by the offeror.