City Developments (CDL) is making a second bid to take over Millennium & Copthorne Hotels (M&C), for a maximum cash consideration of £776.29 million (S$1.35 billion) this time with the blessing of key minority shareholders.
The Singapore-listed developer, in a statement issued late yesterday, said that the move, made through an indirect wholly-owned subsidiary, is aimed at boosting recurring income and enhancing underperforming assets in an increasingly challenging global hospitality environment.
Under the deal, the subsidiary, Agapier Investments Limited (Bidco), will acquire 34.8 per cent of M&C not already held by CDL, at 685 pence for each share. The offer is final and will not be increased, CDL said. Currently, CDL owns 65.2 per cent of M&C, which has a portfolio of more than 140 hotels in over 26 countries.
M&C shareholders will be entitled to receive 685 pence for each share, an increase of 65 pence from the previous offer of 620 pence (which included a special dividend of 20 pence per share) made on Dec 21, 2017. The final offer also represents a premium of about 37 per cent on M&C's last closing price on June 6.
The previous offer lapsed on Jan 26, last year, as CDL did not satisfy the minimum acceptance condition of more than 50 per cent of M&C's shares that it did not already own.
But this time, CDL said it has "received irrevocable undertakings to accept the final offer" from JNE Partners, MSD Capital, International Value Advisers, Classic Fund Management and BWM. These key minority shareholders hold a total of 49.3 million M&C shares, representing about 43.6 per cent of M&C shares not already owned by CDL.
"Further, M&C's independent directors, who have been advised by Credit Suisse, consider that the terms of the final offer are fair and reasonable, and intend unanimously to recommend that M&C shareholders accept the final offer," said CDL.
The final offer values the entire issued and to be issued ordinary share capital of M&C at £2.23 billion. The £776.29 million payable by CDL will be funded through a combination of internal cash resources as well as funds under a credit facility.
Mr Sherman Kwek, CDL's group chief executive officer, said: "Taking M&C private is in line with CDL's strong focus on boosting recurring income and enhancing underperforming assets. We are pleased to have garnered the support of M&C's independent directors and key minority shareholders.
"The offer enables shareholders to exit an illiquid stock at a significant premium. We believe that a privatised M&C will be in the best position to navigate the increasingly challenging and competitive global hospitality landscape. M&C will be able to leverage CDL's significant resources, real estate capabilities and global network to reposition its assets and drive sustainable hotel performance."
Once the final offer is completed, CDL will work with M&C's management team and employees to meet operational challenges and improve the operating and financing efficiency of its hotels by leveraging on CDL's infrastructure, network, financial resources and execution capabilities.
Given these operational challenges, CDL said it will have to become increasingly involved in the operational and financial management of M&C. CDL intends that M&C will continue to own, lease, manage, franchise, invest in and/or operate hotel assets. CDL said it will continue to evaluate opportunities and may make changes to individual hotels within M&C's portfolio to meet the challenges facing its business.
As M&C owns land in New Zealand, the final offer is also subject to a New Zealand Overseas Investment Office pre-condition relating to the granting of consent and/or receipt of applicable exemptions under the New Zealand Overseas Investment Act and other regulations.
Barclays Bank and Merrill Lynch (Singapore) are acting as the joint financial advisers and Linklaters is acting as legal adviser to CDL.