CDL fails in bid to buy out New Zealand hotel unit
The company has said it will not make another offer before January, in accordance with New Zealand takeover rules
[SINGAPORE] City Developments Ltd (CDL) failed in a bid to buy out its listed New Zealand hotel unit, in another setback for the embattled Singapore developer.
The company controlled by Singapore’s richest family has sought to take Millennium & Copthorne Hotels New Zealand private. A revised final offer did not attract sufficient interest from minority investors to meet a 90 per cent threshold by a May 8 deadline, the hotel operator said in a New Zealand stock exchange filing on Friday (May 9).
CDL had offered to buy the 24 per cent of ordinary shares it did not own. That would have cost about NZ$71 million (S$54 million) at the most recent offer price, according to Bloomberg calculations.
The property firm is trying to recover from a family feud that has raised questions about the ability of chief executive officer Sherman Kwek to engineer a turnaround after a public spat with his father, executive chairman Kwek Leng Beng.
An offer of NZ$2.25 a share for the New Zealand unit was first rejected by its independent directors in February, who said that it was “too low and is inadequate”. After the offer was raised to NZ$2.80 a share in April, it was rebuffed again by the directors.
A CDL spokesperson said that the firm had no immediate comment beyond what was in the exchange filing.
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The result means Millennium & Copthorne will remain publicly traded in New Zealand, where it was first listed in 1985, according to the exchange.
CDL already controls the firm and managed to increase its stake to nearly 84 per cent after the latest proposal. The company has said that it will not make another offer before January, in accordance with New Zealand takeover rules.
The developer has said that a delisting would simplify the ownership structure and give minority shareholders liquidity at a premium. When it made the latest offer, it said it would continue to generate profit through hotel assets rather than winding up the portfolio.
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That was not enough to convince the unit’s largest institutional shareholder, Accident Compensation Corporation (ACC), which holds about 4.5 per cent of ordinary shares.
“While ongoing ownership of shares in a highly illiquid company is not an attractive prospect for shareholders, we believe the alternative on offer is a materially worse option,” New Zealand government-owned ACC said.
ACC repeated earlier criticisms of the offer being “unreasonable and opportunistic”, accusing CDL of being unwilling to address the unit’s lack of liquidity.
The insurer highlighted “cyclically low earnings and acquisitions which appear to be value destructive”, saying it led to the firm’s shares falling to a near decade low.
Millennium & Copthorne shares rose 0.7 per cent to NZ$2.80 on Friday. The stock has gained about 69 per cent from an eight-year low in October, helped by the takeover offer. Shares of CDL were little changed in Singapore and are down more than 5 per cent this year, giving it a market capitalisation of S$4.3 billion.
CDL is seeking to regain investor confidence despite doubts about the unity of its board, which resurfaced at an acrimonious shareholders’ meeting last month. CEO Sherman Kwek told investors his priority is to reduce the firm’s high debt load and make more divestments this year. BLOOMBERG
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