One of Singapore's oldest companies, United Engineers (UE), is set to be the subject of a takeover bid as part of deals that could be worth up to $1.83 billion.
A consortium led by Chinese property developer Yanlord Land Group and Singapore landlord Perennial Real Estate Holdings has bought a 33.5 per cent stake in UE, founded in 1912, at $2.60 a share.
The consortium intends to make a mandatory general offer for the rest of the engineering, property and hospitality company's shares at the same price.
Through the consortium, Yanlord Perennial Investment (Singapore) - Yanlord, Perennial and its two sponsors Mr Kuok Khoon Hong and Wilmar International, and an investor - also acquired a 10 per cent stake in UE unit WBL Corp at $2.07 a share yesterday.
The stakes in UE and WBL amount to $729.7 million. The stakes were held by OCBC Bank, its insurance arm Great Eastern, and other shareholders, including the bank's founding Lee family.
The consortium is committed to acquire another 19.9 per cent stake in WBL at a later date. If it owns more than 50 per cent of UE, an offer will be made to buy the remaining shares in WBL at the same price of $2.07.At the offer prices, UE and the 29.9 per cent WBL stake are worth $1.83 billion.
The proposed deal will allow Yanlord and Perennial... to strengthen positions in their existing markets. The consortium also hopes to improve the current performance of WBL's Chinese properties by using Yanlord and Perennial's existing network with the local authorities.
UE's properties include projects in China and Singapore malls like UE BizHub City mixed-used development; while WBL owns properties in the same Chinese cities where Yanlord and Perennial have properties. The proposed deal will allow Yanlord and Perennial, which own sizeable portfolios in China and here, to strengthen positions in their existing markets. The consortium also hopes to improve the current performance of WBL's Chinese properties by using Yanlord and Perennial's network with the local authorities.
The $2.60 offer represents a 7.9 per cent premium over UE's closing price of $2.41 on Sept 26, the day before OCBC announced a strategic review of its stake. It is at a 4.1 per cent discount to the stock's last price of $2.71 this week before trading was suspended on Wednesday. Perennial and Yanlord shares were also halted on Wednesday.
DBS Vickers (Hong Kong) said the $2.60 a share price is "reasonable and lower than its previous expectation. The investment is relatively small to Yanlord".
Yanlord's share of the $729.7 million purchase is $357.6 million, while Perennial's is $237.2 million. Yanlord, which develops high-end residential and commercial projects in China, had US$1.9 billion (S$2.6 billion) of cash and equivalents at end-March, Bloomberg said.
The deal would cap a three-year push by OCBC to offload its stake in UE. The bank started discussions in 2014 to sell the holding to Thai billionaire Charoen Sirivadhanabhakdi, but talks lapsed the next year without a deal.
Mr Zhong Sheng Jian, chairman and chief executive of Yanlord, said: "Singapore's real estate market continues to present a good value proposition for developers seeking to develop stable and recurring revenue streams."
Perennial CEO Pua Seck Guan noted that the partnership between Perennial and Yanlord brings together "synergistic skillsets and on-ground delivery capabilities, which will facilitate the unlocking of the potential value in United Engineers for all stakeholders."
The consortium intends to maintain UE's mainboard listing unless it does not satisfy the public float requirement. The offer document will be dispatched to UE shareholders no later than Aug 3.