CapitaLand has proposed privatising its real estate development business, and consolidating its fund management and lodging business in the group's biggest-ever overhaul.
Under the scheme, the group's investment management platforms and its lodging business will be consolidated into CapitaLand Investment Management (CLIM), which is to be listed by introduction on the Singapore Exchange.
With assets under management (AUM) of about $115 billion, CLIM is expected to be the largest real estate investment manager (Reim) in Asia, and the third-largest listed Reim company globally, CapitaLand said in a joint announcement yesterday with CLA Real Estate Holdings, an indirect fully owned unit of Temasek.
CapitaLand's real estate development business will be placed under the private ownership of CLA. The privatised entity, CapitaLand Development, will develop projects as a key pipeline for CLIM and be helmed by its chief executive, Mr Jason Leow, who is also president for Singapore & International of CapitaLand group.
If approved, the scheme should be completed in the fourth quarter, with trading of CLIM taking place before year end. CapitaLand debuted on the Stock Exchange of Singapore on Nov 21, 2000.
CapitaLand shares last traded at $3.31. A trading halt on the stock was called before the market opened yesterday and lifted at the close.
Under the proposed scheme, for every one share held in CapitaLand, eligible shareholders will receive one CLIM share, between 0.155 and 0.143 unit of CapitaLand Integrated Commercial Trust (CICT) and cash of $0.951.
The implied value per share for CapitaLand's shareholders is $4.102. This is 24 per cent above its last traded price and represents a premium of 27 per cent to the one-month volume-weighted average price.
CapitaLand's group CEO Lee Chee Koon will be group CEO of CLIM.
Mr Lee said: "This restructuring is about sharpening our focus and positioning ourselves to be an asset-light and capital-efficient business. We have made good progress to pivot ourselves to the new economy sectors, expanding our global footprint and growing our fee-income business.
"The real estate development business is subject to longer gestation periods and not adequately appreciated by the public markets. With a privately held development business, we will be able to better ride property development cycles to optimise returns."
He told analysts and reporters at a briefing yesterday: "We believe that if we can list the investment management business separately, that should allow us to trade better than what we are trading today.
"The majority of our capital is exposed to Singapore and China. With the vaccine roll-out, the worst of the pandemic is behind us. That's why it's right to accelerate our transformation and propose this restructuring."
Ms Carmen Lee, head of OCBC Investment Research, believes that "with the potential market capitalisation of CLIM, the new listco will likely remain on the STI". "It is likely to be a 1-1 swap," she said.
One advantage, OCBC Investment Research noted, is that CLIM's fund management and lodging business "generates more recurring income streams, and is expected to fetch a higher valuation than the traditional property development business".
Retail shareholder Mano Sabnani, who invested $40,000 in CapitaLand stock more than five years ago, does not feel it is a fair deal for minority shareholders. "We invested in CapitaLand for its development business. Why should we be forced to give up those assets?" he said.
Under the proposed scheme, CapitaLand will distribute about 48 per cent of shares in CLIM to all its shareholders, excluding CLA.
CapitaLand will continue to own a 52 per cent interest upon listing of CLIM. Its current 28.9 per cent stake in CICT will be reduced to 22.9 per cent.
The managers of all the listed real estate investment trusts and business trusts, as well as selected unlisted funds managed by CapitaLand, will be held under CLIM.
These funds have a total fund AUM (FUM) of about $78 billion as at end-December last year. CLIM's investment management business will be focused on fee-related earnings and FUM growth.
CapitaLand's lodging management business, which encompasses the global serviced residence management platform under The Ascott Limited, will also become part of CLIM.
The remaining real estate development-related business and assets under CapitaLand, with a pro forma net asset value of about $6.1 billion, will be held privately by CLA once the scheme is completed.
The scheme must be approved by the High Court and CapitaLand's independent shareholders at an extraordinary general meeting and a scheme meeting, which are to be held by the third quarter.