Perennial Retail China Trust - Can investor achieve perennial happiness from holding new shares?

5/2/2015 – Kuok Khoon Hong, nephew of Malaysian billionaire Robert Kuok and the co-founder of Wilmar International, held about 16.8% in Perennial Retail China Trust (PCRT) until April 2014 when Investor Central wrote an article about the company.

He now holds 53.8% (Source:Reuters), but not in PCRT, instead, in Perennial Real Estate Holdings Limited (PREHL), a company formed and listed on the SGX via a reverse takeover of St. James Holdings and PCRT.

Even before the offer was made to PCRT's unitholders, PREHL and its concert parties' total direct and deemed interest in the PCRT was 44.3%.

The offer had to become unconditional when this figure crossed 50%.

Unitholders of PCRT were offered S$0.70 for each PCRT unit, to be satisfied by the issuance of 0.52423 PREHL shares at an issue price of S$1.34 for each PREHL share or, in other words, exchange 1.91 PCRT units for every PREHL shares.

As a result, on 22 December 2014, PREHL gained control of 96.3% of PCRT at the close of its takeover offer, and it was delisted on 5 February 2015.

The only difference between PCRT and PREHL was that the former was focused only on China and the latter became a diversified real estate player with assets in China and Singapore, and is now worth about S$2.6 bln.

So, how do shareholders gain from the deal?

Investor Central. Asian insights for global investors. We ask the tough questions of Asian companies which global investors need answers to.

PREHL highlighted that the offer price was at a premium of about 28% to 34%, and provided an implied entry price in PREHL shares at S$0.99, thereby providing significant upside of 65% to 114%.

However, one month share price performance shows that it is trading at S$1.05, which is 6% above the entry price but 22% below the issue price of S$1.34.

It is worth mentioning that one of the purpose stated for the offer was better access to debt and capital markets.

In fact, PREHL established a S$2 bln multicurrency debt issuance programme on January 22.

Looks like it needed funds desperately to fund its projects!

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