The Business Times

WBL Corporation's break-up has begun

UE sells Wearnes Auto to distributor with Malaysian links for S$455m

Published Tue, Aug 26, 2014 · 10:00 PM

[SINGAPORE] The break-up of one of Singapore's most venerable companies is now well underway, with the sale of luxury car distributor Wearnes Automotive, the flagship asset of the 108-year-old conglomerate known as WBL Corp.

WBL's remaining property, engineering, manufacturing and distribution businesses now look set to be sold off to the highest bidder.

Parent United Engineers (UE), a property and engineering group, announced its S$455 million disposal of Wearnes - what it called a "non-core" asset - on Tuesday morning. After Monday's trading halt, UE shares opened on Tuesday at S$2.80 before closing unchanged at S$2.76.

Broker CIMB, the only house actively covering the stock, increased its target price from S$2.53 to S$2.85 with a "hold" recommendation. It said: "The proposed sale . . . is a positive. Fundamentally, it reduces gearing and unlocks value for shareholders.

"However, at a 23 per cent discount to revised net asset value (RNAV) and about one time the adjusted net tangible assets (NTA), we believe the positive impact from the sale has been priced in."

The sale to fellow distributor StarChase Motorsports (Singapore) comes slightly more than a year after UE won a bruising takeover battle for WBL Corp last June, incurring a lot of debt to swallow the conglomerate. It was criticised for acquiring unrelated businesses, though it had said that it wanted Wearnes' motor earnings to smooth out its lumpy property earnings.

Soon after WBL was acquired, suitors came for its car distribution business, The Business Times understands. Wearnes distributes luxury car brands such as Bentley, Bugatti, BMW and Volvo.

The S$455 million Wearnes Automotive sale price is calculated on a debt-free, cash-free basis. UE will recognise a net disposal gain of S$17.1 million and receive net proceeds of S$292.1 million. UE said that net proceeds would be used to repay borrowings and as working capital.

The buyer has links to a Malaysian conglomerate. StarChase founder Yaw Chee Ming owns timber conglomerate Samling Group, also a developer. His brother, Chee Siew, is executive chairman of offshore marine group Otto Marine.

Meanwhile, by selling parts of its subsidiary WBL off, UE looks to be preening for a potential takeover by Thai tycoon Charoen Sirivadhanabhakdi. UE said this month that it was divesting WBL subsidiary MFS Technology for S$124 million.

Last Thursday, OCBC and Great Eastern revealed that they have been approached regarding a possible sale of their combined stakes in UE and WBL. UE is 35.9 per cent owned by OCBC Bank and its insurance subsidiary Great Eastern. WBL owns 3.4 per cent of UE as part of a complex cross-shareholding structure.

As a deal involving more than 30 per cent of a listed company triggers a mandatory takeover offer, the potential acquirer, understood to be Mr Charoen, could make a general offer for UE itself.

Roger Tan, chief executive of Voyage Research, said: "If the buyer is who we think it is, he's interested in good old brick and mortar. Land is always scarce in important places."

Mr Charoen, who controls drinks maker Thai Beverage, took over then- drinks and property conglomerate Fraser and Neave (F&N) in 2013.

Other parties, drawn by the scent of UE's property assets such as UE Square and UE BizHub Tower at 79 Anson, could enter the fray.

Veteran investor Mano Sabnani said: "It is not a foregone conclusion that UE will go to (Charoen)."

Contenders he listed included conglomerate Straits Trading, which once fought with UE for control of WBL, and Indonesian tycoon Mochtar Riady's Overseas Union Enterprise (OUE), which ultimately lost the F&N takeover battle to Mr Charoen.

CIMB analysts said that the next step was to see whether a takeover will take place. UE now has a market capitalisation of S$1.76 billion.

CIMB noted that Mr Charoen was a savvy investor who will not overpay. "A potential takeover at a 5-15 per cent discount to RNAV could value UE at S$3.02 to S$3.38 a share, implying a 10-23 per cent upside.

"The downside, should there not be a takeover, could be 10 per cent if UE trades back to a 30 per cent discount to RNAV."

Ultimately, the sale of Wearnes Automotive marks the beginning of the end for WBL Corp. Founded in 1906, WBL began as a car distributor in Singapore and Malaysia. In the 1980s, Wearnes Brothers went into manufacturing and turned to the US for technology. Turnover came to S$98 million in 1984. Last year, it hit S$2.4 billion.

With additional reporting by Chan Yi Wen

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