Yanlord Land revives $2.60 per share offer to buy over United Engineers

SINGAPORE (Oct 25): Yanlord Land Group, the China-based property developer, has made an offer to pay $2.60 for each United Engineers share it does not own.

The deal values UE, one of Singapore's oldest companies with businesses in property and hospitality sectors, at $1.66 billion.

The offer price is at a discount 16.6% discount to UE’s net asset value (NAV) of $3.12 as at June 30.

Wholly-owned subsidiary Yanlord Investment (Singapore) (YIS) made the mandatory offer when it became UE’s largest shareholder at 35.27% after buying over Perennial Real Estate Holdings’ (PREH) and Heng Yue Holdings’ stakes in UE for a total of $229.7 million.

The offer price is the same as that of an earlier unsuccessful takeover attempt in July 2017 by a consortium led by (PREH) and Yanlord. The offer price was at a discount of 13.9% to its then NAV of $3.02.

The offer is conditional upon YIS and concert parties holding more than 50% of the total voting rights at the close of the offer. If the condition is not met by the close of the offer and the offer lapses, YIS will not be able to make another offer for UE for 12 months.

Meanwhile, a chain offer may be triggered for WBL Corporation, a private property development and investment, engineering, manufacturing, and distribution company.

If UE’s share offer becomes unconditional as to acceptances or the offeror acquires statutory control of UE, YIS will also be required to make a mandatory unconditional offer for the rest of the WBL shares, at $2.5947 apiece.

UE privatised WBL in 2014 after a tussle for control with Straits Trading. When Oversea-Chinese Banking Corp divested UE to the Yanlord-Perennial consortium, the latter had to make an offer for WBL and acquired 28.12 million shares at $2.07 each.

Yanlord says it does not plan to delist UE and the acquisition is part of its plans to consolidate its interest in the company and strengthen position in Singapore and China.

“PREH has been struggling while Yanlord has made good progress in China and is interested in buying assets in Singapore,” an analyst told The Edge Singapore.

See: Market chatter suggests Yanlord is poised to make a general offer for United Engineers

To be sure, UE’s performance has stagnated since the Yanlord-PREH consortium acquired its stake in the company. In FY2016, UE recorded a profit of $140.58 million, but this dropped to $87.18 million in FY2017, and fell further to $55.76 million in FY2018. For 1HFY2019, UE reported a net profit of $16.1 million, down 20% y-o-y.

If this trend continues in the second half of the year, UE will be on track to recording its lowest earnings since the global financial crisis. UE’s dividend per share has also fallen from 12 cents in 2016 to a paltry three cents last year. UE has not announced a dividend so far this year.

On Friday, shares in UE closed 4 cents lower at $2.62 while shares in Yanlord closed 1 cent higher at $1.18.