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GLP deal: Long-term investing takes patience

In 2008, GIC bought GLP as a distressed asset, and it now has a $16b buyout offer

Global Logistic Properties (GLP) had an attractive business proposition from the get-go: As a leading warehouse operator in China and Japan, it was set to ride on the growing demand for logistics space in Asia.

Its initial public offering (IPO), the second-largest in Singapore, attracted huge interest, with the retail tranche more than 10 times oversubscribed.

Along the way, the firm grew, and GLP now owns and runs a US$41 billion (S$56 billion) portfolio of 55 million sq m of warehouses and other logistics facilities in China, Japan, the United States and Brazil.

Yet in the seven years following its market debut, the stock was much overlooked, falling to as low as $1.56 at one point.

On Dec 1 last year, the day that GIC, GLP's largest shareholder with a 37 per cent stake, requested a strategic review of the options available to enhance shareholder value, the stock ended at $2.06 - just above its IPO price of $1.96.

For investors who held on to the stock through those lean times - perhaps in the hope that GIC would do something about the situation - last week offered some validation.

The takeover offer from a consortium that includes GLP chief executive Ming Mei and a group of Chinese firms values the logistics firm at $16 billion, making it the largest private buyout of an Asian company.

GLP Tokyo, part of Global Logistic Properties' portfolio of logistics facilities it manages in China, Japan, US and Brazil. In the seven years following its market debut, the stock was overlooked, falling to as low as $1.56. But a recent takeover bid amounts to effectively $3.44 a share. PHOTO: GLOBAL LOGISTIC PROPERTIES

The bid amounts to $3.38 a share, but does not include the upcoming dividend of six cents a share that will be paid next month.

That puts the offer effectively at $3.44 a share - a sweet 67 per cent above the level the stock was seven months ago, when GIC called for the strategic review. It is also above GLP's highest close.

This is not yet a done deal. Shareholders will soon get to vote on it at an upcoming meeting.

With enough shareholder approvals and if other conditions are met, the buyout would likely be completed in April next year.

If anything, the GLP deal proves that long-term value investing takes patience - and a bit of faith.

GIC had bought GLP at a bargain as a distressed asset back in 2008 during the financial crisis. It listed it on the stock market in 2010, giving retail investors here a quality asset to invest in.

Late last year, GIC began working behind the scenes to make sure this was realised.

According to sources, after requesting the strategic review, GIC worked with all parties involved to raise interest in the large investment and facilitated exchanges of views, lifting of certain information restrictions and speeding up of the process.

With GLP's own CEO involved as a potential acquirer, there had been accusations from rival bidders that the process was unfair. Warburg Pincus, Blackstone Group and RRJ Capital had complained, for example, that they were being stonewalled on requests for detailed financial information on GLP.

But GIC stepped in to maintain fair competition. Last month, it was reported that representatives of GIC even called the GLP working team managing the sale into their offices and instructed the group to be more responsive to bidders' questions and share information transparently in the auction.

All that work has resulted in a deal that GIC will likely count as a win.

With this final sale (GIC had earlier sold 595.7 million GLP shares at $2.60 a share), GIC's listed investment in GLP since October 2010 will have generated a substantial profit, including dividends received, amounting to about $3.4 billion.

This is on top of GIC reaping gains upon the IPO, given its much lower purchase cost of the then distressed asset in 2008.

It would not come as a surprise if, in next year's annual report, GIC's management points to this deal - if it is completed - as a reflection and validation of its contrarianism, patience and long-term value investing strategy.

A version of this article appeared in the print edition of The Straits Times on July 18, 2017, with the headline 'GLP deal: Long-term investing takes patience '. Print Edition | Subscribe