CDL, M&C Hotels' independent directors defend buyout bid in face of investor unrest, say rejected two lower offers

The Millennium Hotel Mayfair in Grosvenor Square, London, is one of M&C's portfolio of 137 hotels in 27 countries. PHOTO: MILLENNIUM & COPTHORNE HOTELS

SINGAPORE (REUTERS) - City Developments (CDL) and independent directors of Millennium & Copthorne Hotels (M&C) plc have defended CDL's buyout offer for the London-listed company after other investors criticized the deal.

The offer would see CDL acquire the 34.8 per cent of M&C that it does not already own for £624.3 million and values the hotelier in its entirety at about £1.8 billion.

In a joint statement on Thursday (Oct 19), CDL and M&C's independent non-executive directors said they had "taken into account both the potential growth and the risks inherent in the continued execution of M&C's strategy, as well as the underlying assets of M&C" when deciding to back the bid from CDL.

They also said they had rejected two previous lower offers from CDL - the first pitched at 510 pence a share - before the Singapore property developer offered 552.5 pence in cash, which was announced to the stock market on Oct 9.

The statement comes after minority shareholders in M&C, including Fidelity International, criticized the bid from CDL, which is part of billionaire Kwek Leng Beng's Hong Leong Group, as being too low, arguing it does not account for the value of the hotelier's property assets. M&C has 137 hotels in 27 countries, including sites in London and New York.

In the joint statement, CDL and the independent directors said that historically the stock market has not tended to focus on M&C's underlying property assets when valuing the company.

"Whilst an assessment of the underlying assets of M&C is a relevant reference point, it is important to note that M&C has traded, and continues to be valued by the market, primarily on an earnings basis," said the statement. "It is not M&C's strategy to realize value through the sale or repurpose of its assets."

CDL has previously said that it does not intend to sell off any of M&C's London or New York hotels if the takeover is successful and that it plans to continue running the company as a hotel owner and operator.

The directors confirmed on Thursday that this constituted a so-called post-offer intention statement under Britain's Takeover Code.

While such statements are not binding, the Code stipulates that such statements must be accurate and made on reasonable grounds.

CDL already owns 65.2 per cent of M&C and its bid comes at a 21.4 per cent premium to the hotelier's share price before the takeover proposal was made public.

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