SINGAPORE - DIVERSIFIED United Engineers has inked a deal to sell its controlling stake in integrated building solutions provider to a private equity fund for $230.2 million.
United Engineers will sell its 68.2 per cent stake in UE E&C to a unit of Southern Capital Group at $1.25 a share.
Minority shareholders of UE E&C hoping for a windfall from a subsequent general offer for the company are likely to be disappointed as the price works out to a discount of 2.3 per cent to the shares' last traded price of $1.28 on Sept 30.
The offer is at a 2.9 per cent discount to the volume weighted price of $1.29 in the last six months.
Those who bought the shares earlier should enjoy some gains as the volume weighted price of UE E&C was $1.17 in the last 12 months and 97 cents in the last 18 months.
Key shareholders of United Engineers - OCBC Bank, Great Eastern Holdings, Lee Foundation States of Malaya and Singapore Investments - have agreed to vote in favour of the divestment when the deal is put before shareholders later.
Together, these shareholders own 30 per cent ordinary shares and 70 per cent preference shares of United Engineers.
In a statement, the board of United Engineers said the deal was in line with the company's ongoing strategic review and objective of streamlining activities and businesses across the group.
"The proposed disposal unlocks value for the company's shareholders and increases the overall financial capacity and flexibility of the group so as to enable the company to strengthen and grow its other strategic business units," it noted.
According to a preconditional statement, buyer Southern Capital is a private equity firm that focuses on buyouts of middle market businesses in Southeast Asia.
In Singapore, it has acquired various businesses including Qualitas Medical Group and was part of a consortium that acquired Mentor Media in 2006.
Once all the preconditions of the deal are met, Southern Capital will mount a general offer for the remainder of UE E&C shares.
It intends to make UE E&C a wholly-owned subsidiary. This means Southern Capital will seek to delist and privatise the company should its offer crosses the 90 per cent threshold for compulsory acquisition.
It will also mean a short existence for UE E&C as a listed company, given that it began trading on the mainboard in 2011.
The UE E&C group provides integrated mechanical & electrical (M&E) engineering services that include high and low-voltage electrical power distribution, air-conditioning and mechanical ventilation, and fire protection, alarm and sanitary systems.
It also provides a comprehensive range of services for its construction business, from design and build, civil works to general construction for residential, industrial, commercial and institutional buildings as well as infrastructural works.
UE E&C is an active player in public housing through executive condominium projects, as well as private residential property development, through taking up minority stakes in joint ventures.
It also has overseas operations in Brunei, China, Vietnam, Indonesia and Malaysia.