CDL chairman defends M&C bid amid opposition

Kwek Leng Beng urges investors to accept 620-pence-a-share offer, calling it a 'significant premium'

Millennium & Copthorne Hotels is behind 137 hotels around the world, such as Millennium Resort Patong Phuket.
Millennium & Copthorne Hotels is behind 137 hotels around the world, such as Millennium Resort Patong Phuket. PHOTO: MILLENNIUM

LONDON • Mr Kwek Leng Beng, the Singaporean billionaire attempting to take over Millennium & Copthorne Hotels, defended his bid on Monday after a group of investors argued it was too low and sought to block the deal.

The chairman of City Developments Limited (CDL), which has offered to buy out minority investors in the FTSE 250 hotelier for 620 pence a share, urged M&C shareholders in a letter "to consider the very material premium and value" of its bid.

Three minority investors in the hotel chain last week rejected CDL's offer for the 34.8 per cent of M&C it does not already own.

International Value Advisers, MSD Partners, and Classic Fund Management urged other investors to join them and block the bid, arguing that the offer, which values the business at £2 billion (S$3.6 billion), fundamentally undervalued the hotelier. The three investment firms, which represent about 37 per cent of the shares targeted by CDL, said the bid failed to reflect the value of the hotelier's property portfolio.

Mr Kwek said the investment firms' argument was "somewhat disingenuous" and based on "the false premise of unrealised real estate value".

He said: "The CDL board sincerely hopes that the actions of a few shareholders who have entered since the financial crisis will not preclude a number of long-term shareholders from being able to take advantage of this offer to exit from their holding in an illiquid stock at a real and significant premium."

M&C is behind 137 hotels around the world, which it either owns, operates, invests in, or franchises.

CDL needs to secure acceptances from investors holding more than 50 per cent of the stock not already owned by Mr Kwek for the deal to go through. The Singaporean company has declared its offer final, meaning it cannot be increased under Britain's takeover rules.

The dispute puts the trio of investors at odds with the head of the hotelier's board because Mr Kwek is also chairman of M&C.

CDL's offer has also been recommended by the hotelier's independent board directors.

Mr Kwek said in his letter that CDL's board had carefully considered the arguments put forward by a "small number" of M&C investors, who want the bid to be based on the company's net asset value.

He said "these valuations only exist in theory and if attempts were made to crystallise them, would prove ethereal".

He defended his offer by arguing that the current practice for valuing hotel asset portfolios was based on multiples of either net profit or earnings before interest, taxes, depreciation and amortisation, rather than net asset value.


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A version of this article appeared in the print edition of The Straits Times on December 20, 2017, with the headline CDL chairman defends M&C bid amid opposition. Subscribe