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Stocks In Focus SG (Straits Trading, Rex, Noble) – 29/10/13
Straits Trading Acquires 20.1% Stake In ARA For $294.4m
The Straits Trading Company (STC) has acquired an aggregate 169.9 million shares, worth $294.4 million, in ARA Asset Management, a real estate fund management company and also an affiliate of Cheung Kong Group, from JL Investment Group and Cheung Kong Investment Company. The proposed acquisition will result in STC becoming the largest shareholder of ARA with a 20.1 percent interest. STC will finance the deal by both cash ($244.4 million) and the issuance of 13.7 million new STC shares at $3.65 each ($50 million). At the same time, STC has also entered into a co-investment agreement via its subsidiary, STC Capital, with JL Investment Holding and JL Equity II, to invest in real estate and real estate-related investments across specific geographical locations. With an initial capital of $200 million and a potential total capital commitment of up to $950 million, the agreement will commence with three fund entities: a development fund, a distress fund and a strategic investments fund. Meanwhile, STC’s existing property assets (other than hospitality-related assets ) , including the Straits Trading Building, will fall under ARA’s management in a separate account arrangement.
Signifiance: The management is committed to acquire a strong and well managed business and believes that with ARA’s strong track record in its growth of asset under management of $23.5 billion as at 30 June 2013, the acquisition is aligned to this commitment. Furthermore, the co-investment agreement will serve as capital commitments for ARA to further expand its private funds business.
Rex To Enter Oil Production Technology JV
Rex International Holding (Rex), via its subsidiary, Rex International Investments, has entered into a 67:33 joint venture (JV) with Ogsonic AG, a Swiss company which invests in technologies pertaining to the oil services sector. The JV company, Rexonic AG, will be incorporated in Switzerland and operate as a technology service provider via its proprietary, patented high-power ultrasound technology for commercial oil well stimulation without geographical restrictions. Rex will finance the deal with US$10 million in cash and $12.4 million by issuing 15.8 million new shares, at $0.787 each, in a private placement to Ogsonic, representing approximately 1.54 percent of its enlarged issued share capital. Separately, Rex has proposed to place 70 million new shares, at $0.755 apiece, to raise approximately $50.5 million in net proceeds, which would be used to fund new investments, including the above mentioned JV.
Significance: As a complement to Rex’s proprietary technologies in oil exploration, Rexonic would not only produce a recurring revenue stream but also extend the company’s core competency to include the oil production phase. As a result, this would also serve to strengthen the company’s technology offerings and bring it closer towards being the partner of choice for both oil exploration and production.
Noble Exerts Pressure On Yanzhou To Raise Offer Price
Noble Group has pressured Yanzhou Coal Mining Co to raise its initial US$191 million offer to take its Australian Yancoal unit private from Noble, which owns more than half the minority shares. In July 2013, Yanzhou proposed to buy out the 22 percent stake of Yancoal Australia that it does not already own at A$0.91 a share (approximately $1.08 a share), but Yanzhou has yet to make a formal offer. Although Noble has the ability to block the deal from going ahead, it has put a proposal to Yanzhou for a higher offer, as Noble wants proper value for their stock. Notably, the Foreign Investment Review Board (FIRB) in Australia had earlier required Yanzhou to list its Australian assets as well as meet a series of conformity pertaining to stake ownership.
Significance: The deal would give Yancoal more control over a key coal asset during this time when market value has slumped in line with falling coal prices. Stiff opposition is however, expected to be faced from local regulators in Australia. If the raised price proposal is accepted, Noble could possibly expect a better disposal gain in 2014, if it pans out by then.
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