United Industrial Corporation Limited - Should Singapore Land shareholders accept bid?

16/3/2014 – United Industrial Corporation (UIC) has made a general offer to buy out the rest of Singapore Land (SingLand) it does not own at S$9.40 per share.

UIC, which is 54% owned by the Wee family and 37% by JG Summit that is controlled by Philippine tycoon John Gokongwei, currently holds an 80.4% stake in SingLand.

The offer represented a premium of 12% over SingLand's price of S$8.40 on February 19.

It is currently 80.4% owned by UIC, while US-based equity fund Silchester International Investors LLC holds another 8.2%, leaving free float at 11.4%.

The reasons highlighted for privatisation include the stock's poor trading liquidity, greater financial flexibility for UIC, and to eliminate listing costs.

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

Question

1. Can it succeed in taking Singapore Land private?

DMG OSK Research thinks that the SingLand offer is not attractive as UIC's offer is at a steep 35% discount to its revised net asset value (RNAV)/share of S$14.50.

The analyst says SingLand's hotels in Singapore's Marina Bay area, consisting of the Pan Pacific, Marina Mandarin and Mandarin Oriental, which are currently carried at cost will lift its NAV by as much as S$1/share after revaluation.

Also, SingLand's portfolio of offices, retail assets and hotels generate steady, recurrent earnings of S$200 mln a year and carries low operating risk.

And this is despite challenging environment with the many rounds of property cooling measures in Singapore.

Hence, it recommends investors reject UIC's low-ball offer.

On the other hand, it suggests buying into SingLand because the offer price is bound to be raised eventually.

This raises more questions.

Question

2. How did it derive a value of S$9.40 for SingLand's shares?

The 2013 Annual Report values those same shares at S$13.07.

(Total number of questions in the full story: 5)

We have sent these questions to the company to invite them for an on-camera interview, and/or seek their written response.

So far, we have not had a reply (which is why you are seeing this message).

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