Offer for Wheelock 'fair and reasonable, but not compelling'

PrimePartners Corporate Finance, the independent financial adviser (IFA) to the recommending directors of Wheelock Properties (Singapore), said yesterday that the financial terms of the offer to take the company private are "fair and reasonable, but not compelling, and are not prejudicial to the interests of minority shareholders".

It reached this conclusion after considering that the developer's revenue has decreased significantly in the period under review as most of the completed development properties have been sold, and the company has not added any new property development projects during this time.

The IFA said that even though the offer price of $2.10 per share is at a 19.2 per cent discount to the company's net asset value, the discount is less than the range of discounts at which the shares had consistently traded over the one-year period.

In fact, the shares have not traded above the offer price since July 14 last year, up until the offer announcement date. Since the offer was made, however, the counter has jumped. Shares closed flat at $2.22 yesterday - about 5.7 per cent higher than the offer price.

But in the past one year, the shares have traded thinly at an average daily trading volume of about 634,000 shares, representing about 0.22 per cent of the company's free float.

"While there appears to be a ready market for the shares as indicated by the regular frequency of transactions, the absolute trading volume of the shares is nevertheless very thin, which renders the shares illiquid for investors who wish to undertake transactions in larger amounts of shares," the IFA said.

In comparison with the precedent privatisations, the premium of 22.7 per cent implied by the offer price over the three-month volume-weighted average price of the shares is also "within the range but below the respective mean and the median premia of 34.1 per cent and 27.5 per cent" implied by the offer prices of comparable precedent transactions, the IFA said.

The IFA has accordingly advised the directors to recommend that shareholders accept the offer, unless the shareholders are able to obtain a higher price on the open market. The directors have concurred with the advice of the IFA over the offer and, accordingly, recommended that the shareholders accept the offer.

So far, the offeror and the parties acting in concert with it collectively hold about 76.2 per cent of the shares, and the company has confirmed that there is no alternative or competing offer available to the shareholders.

The offer will close at 5.30pm on Sept 7, or a later date that may be announced by the offeror.

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A version of this article appeared in the print edition of The Straits Times on August 25, 2018, with the headline Offer for Wheelock 'fair and reasonable, but not compelling'. Subscribe