Sias requests offer price revision, two-week extension for GL offer

INVESTOR watchdog Securities Investors Association (Singapore), or Sias, has called for GL's offeror to " seriously reconsider" improving the offer price to reflect the true value of GL.

This came after shareholders highlighted their concern that the current offer price of S$0.70 per share "significantly undervalues" their shareholdings, and that the offer is not fair - an opinion affirmed by the independent financial adviser (IFA) W Capital Markets.

"Shareholders have been patient and are on a wait-and-see approach, hoping for an upward revision of the offer price," David Gerald, founder, president and chief executive officer of Sias, said in a letter to the board of GL, which was also sent to media.

He also called on the offeror to extend the offer deadline by two weeks, to give minority shareholders time to understand the issues and concerns.

The deal was supposed to end at 5.30pm on March 4, 2021.

The offeror, a special purpose vehicle of Hong Kong-listed Guoco Group, had justified its offer price by citing the difficult operating conditions caused by Covid-19, and the premiums that the offer price carries compared to recent trading prices.

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But Mr Gerald said that it may not be that enticing to long-term shareholders, evident from how GL's market price has run up as high as S$0.725 - above the offer price - between Jan 15 and Feb 8.

The IFA had also computed using a sum of the parts analysis and given the company a lower and upper valuation of S$1.14 and S$1.32, respectively. Lim & Tan Securities also believes that GL is worth at least S$1.16 per share.

Sias thus asked the offeror to explain how the offer price was determined, including whether GL's hotel assets, making up about four-fifths of its total assets, might be undervalued since they are valued through the cost less accumulated depreciation model, rather than the more commonly used fair value model, and as a result, would not have captured any price appreciation over time.

Furthermore, Savills' revaluation exercise had estimated and ascribed negative market value for five of its hotel properties, given their negative Ebitdas (earnings before interest, taxes, and amortisation) caused by Covid-induced short and medium-term revenue falls. "A negative market value means that GL Limited would have to pay a third party to buy the five properties," he said.

"Even if the buildings are completely worthless, the value of the land itself being worth less than zero flies in the face of market reality."

He asked management to explain why it did not use the sales comparison approach to value GL's assets using actual transaction prices of comparable properties instead.

He also wanted to know how critical the privatisation exercise was to GL, given recovering prospects for oil prices and the UK's hospitality sector. "In the interest of minority shareholders, do the involved parties think that this is the most opportune time for a privatisation exercise?" he asked.

He also noted that the offeror's seeming determination to get the deal done this time - its second attempt - after beefing up its stake in GL earlier this year, meaning it will need to take a much smaller margin to successfully privatise and delist the target company.

Mr Gerald said that given this general offer does not require an extraordinary general meeting to be convened, the involved parties need to take additional effort to protect the interests of minority shareholders and address the questions they have, for a smooth facilitation of this exercise.