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Yanlord revives takeover bid for United Engineers at same S$2.60-per-share price

CHINA-BASED property developer Yanlord Land Group on Friday renewed its cash offers for United Engineers (UE), in a deal valuing the latter at S$1.66 billion.

Its wholly-owned subsidiary Yanlord Investment (Singapore) (YIS) is offering to acquire ordinary and preference shares in UE at S$2.60 apiece in cash – the same price as that of an earlier unsuccessful takeover attempt in July 2017 by a consortium led by Perennial Real Estate and Yanlord.

YIS currently holds 35.27 per cent of UE ordinary shares and 97.71 per cent of UE preference shares.

As at 9.09am on Friday, after the offers were announced, shares of UE were down three cents or 1.1 per cent at S$2.63. Yanlord Land's share were trading at S$1.19, up two cents or 1.7 per cent.

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Yanlord does not intend to delist UE.

In 2017, the offer price of S$2.60 represented a 7.9 premium to the last transacted price of UE ordinary shares on Sept 26, 2016, and a 21.7 per cent premium to the 12-month volume-weighted average price prior to and including that date.

Yanlord said on Friday that the implied price to net asset value ratio (P/NAV) of 0.9 is in line with precedent transactions involving Singapore-listed property developers.

Friday’s mandatory offers were triggered under Singapore takeover rules, after one of Yanlord’s wholly-owned subsidiaries acquired a collective 51 per cent stake in the offeror, YIS, from Perennial UW and Heng Yue Holdings. Yanlord now indirectly owns 100 per cent of YIS.

Both Perennial and Heng Yue had wanted to dispose of their respective stakes in YIS in order to focus on investments with direct value creation opportunities, according to Yanlord.

The total cash amount paid for the 51 per cent stake purchase in YIS totalled some S$229.7 million. This values YIS’s holding in UE at S$2.60 per share.

UE shareholders can accept Yanlord’s offers if they wish to recalibrate their portfolio at a favourable valuation amid low trading liquidity and heightened economic uncertainty, or they can remain invested in UE if they believe in its long-term prospects, Yanlord said on Friday.

The ordinary share offer is conditional upon the offeror receiving acceptances which, when taken together with the UE ordinary shares owned, controlled or agreed to be acquired by YIS and its concert parties, result in YIS and concert parties holding more than 50 per cent of the total voting rights at the close of the offer.

If this minimal acceptance condition is not met by the close of the offer and the offer lapses, YIS will not be able to make another offer for UE ordinary shares for 12 months.

DBS Bank is the sole financial adviser in connection with the UE offers.

In addition, there may be a chain offer triggered for WBL Corporation, an unlisted company involved in property development and investment, engineering, manufacturing, and distribution. If the UE ordinary share offer becomes unconditional as to acceptances or the offeror acquires statutory control of UE, YIS will also be required to make a mandatory unconditional offer for the rest of the WBL shares, at S$2.5947 apiece.

In 2017, Yanlord-Perennial consortium’s takeover bid was announced after a lengthy competitive sale process. The offeror also made mandatory offers for UE ordinary and preference shares – triggered by its purchase of OCBC’s approximately one-third stake in UE in July 2017. It lapsed in September that year due to insufficient takers for the ordinary shares.