SIAS: Minority interest addressed in CMA offer

SINGAPORE'S retail investor watchdog has weighed in on the heated debate surrounding CapitaLand's privatisation offer for CapitaMalls Asia (CMA).

The Securities Investors Association (Singapore), or SIAS, said yesterday it is satisfied that there is independence in the review of the offer by CMA and that "minority shareholder interest has been addressed sufficiently".

While some market observers have questioned if the offer for CMA is fair, David Gerald, president and chief executive of SIAS, pointed out that the offer price of $2.22 per share is at a premium - not a discount - to book value when its peers are trading below book value.

The nearest comparable company - Hong Kong-listed Hang Lung Properties, also a shopping mall player in China - is trading at 0.86 times price-to-book.

Mr Gerald said his press statement serves as a "guidance only to CMA's minority shareholders" in view of the comments made by Michael Dee, former regional CEO for Morgan Stanley and senior managing director at Temasek Holdings, against the offer.

SIAS has since been asked by some minority shareholders to provide a view on this issue, he told BT.

Criticisms of CapitaLand's offer for its 65.3 per cent subsidiary centred on whether it is fair for minority shareholders given its "paltry premium over the IPO price and book value multiple", in the words of Mr Dee.

In his analysis published in The Business Times, Mr Dee also flagged a "conflict of interest" given that the chairmen of CapitaLand and CMA are the same person and that five of 10 board members have direct ties to CapitaLand. As such, the majority of CMA's board should not be considered independent, Mr Dee argued.

But SIAS noted that all non-independent directors of CMA are excluded from evaluating the offer. The Independent Board Committee reviewing the deal consists of directors who are independent of CapitaLand and it is helmed by lead independent director, Loo Choon Yong, co-founder of the Raffles Medical Group.

"SIAS also understands that SIC (Securities Industry Council) has approved the independence of these directors. On this basis, SIAS is satisfied that there is independence in the review of the offer and minority shareholder interest has been addressed sufficiently," Mr Gerald said.

Declining to take a view on valuations, SIAS deems it more prudent for shareholders to wait for the IFA (independent financial advisor) report from Deutsche Bank to make an informed decision.

Analysts' reports have differed on their sum- of-parts valuations, with some analysts suggesting a higher valuation. But analysts all acknowledged that CMA has not traded above $2.22 in the past three years.

When CMA was listed in November 2009 at $2.12 apiece, it was debt-free and all the pre-IPO debt was assumed by CapitaLand, thus providing CMA with debt headroom for growth, SIAS pointed out.

Market conditions have also changed since CMA's listing. Religare Capital Markets said in a recent note that a potential China slowdown, lack of capital recycling direction, and competition from e-commerce would render CMA unable to provide the 20 per cent upside that the privatisation deal offers.

When approached by BT, CapitaLand's spokeswoman said the group is unable to comment during this offer period. "We advise CMA shareholders to wait for the IFA report. The Offer document will be sent next week."