Shareholder value in CapitaLand restructuring plan is 'fair and reasonable': IFA

CapitaLand had proposed to split its business into a privately-held real estate development arm.
CapitaLand had proposed to split its business into a privately-held real estate development arm.ST PHOTO: GIN TAY

SINGAPORE (THE BUSINESS TIMES) - Property giant CapitaLand's restructuring plan is "fair and reasonable", the independent financial adviser (IFA) in the deal said in a letter on Saturday (July 17).

The company's independent directors have thus recommended that shareholders give the green light to both a capital reduction exercise and a scheme of arrangement when they vote on the planned transaction next month.

CapitaLand in March proposed to split its business into a privately held real estate development arm, as well as a new, listed unit for investment management platforms and lodging.

Proposed entity CapitaLand Investment Ltd (CLI) would become the largest real estate investment manager (REIM) on the Singapore bourse, with pro forma real estate assets under management of some $115 billion as at Dec 31, 2020, the group earlier stated.

Now, Evercore Asia (Singapore), the IFA, has called the value of the deal fair and reasonable from a financial point of view, as of the latest practicable date.

The IFA added in its letter that independent directors may wish to advise shareholders that they can also choose to sell their shares on the open market, if they can get a higher price.

CapitaLand also said on July 17 that it would hold an extraordinary general meeting and a scheme meeting on Aug 10, starting at 2pm, for shareholders to decide on the planned transaction.

Shareholders can ask questions during the meetings - which will be held electronically - or submit queries in advance by Aug 7.

They must also register for the two meetings, and complete their proxy forms for voting, by the same deadline of Aug 7.

Under the planned scheme, shareholders would effectively own a direct stake in a company with lower leverage, the IFA observed, in laying out factors behind its opinion.

It was comparing the pro forma net debt-to-equity ratio of 0.56 times for CLI, against CapitaLand's net debt to equity of 0.68 times as at Dec 31, 2020.

The IFA also noted that the implied value in the deal includes both a consideration of $4.102 a share, and the financial year 2020 dividend for those who held shares by May 4.

The implied consideration represents a premium over the volume-weighted average price up to date of the restructuring announcement, as well as a premium over average target prices from research analysts, the IFA said.

It added that eligible shareholders stand to receive value for their indirect stake in CapitaLand's development business, which will be privatised by the offeror.

That consideration falls within the price-to-net asset value (NAV) ratio range for similar precedent deals, it said in its letter, while citing the privatisation of Perennial Real Estate Holdings, Wheelock Properties (Singapore), CapitaMalls Asia and Singapore Land.

Evercore also said that, with the transaction, CLI will "retain the benefit of being part of the ecosystem with the privatised CapitaLand" - such as strategic arrangements for opportunities in the development projects that the privatised CapitaLand pursues.

Meanwhile, CapitaLand group chief executive Lee Chee Koon said in a statement: "This restructuring not only unlocks immediate value for shareholders, it is also intended to unleash longer-term value as listed REIMs generally trade at a premium to their NAVs in the capital markets.

"We ask for shareholders' support in this transformative transaction. With our shareholders continuing to participate in the growth of CLI, we are confident that CLI will be able to thrive under CapitaLand's unique ecosystem."

Should shareholders and regulators give the go-ahead, Capitaland is expected to complete the deal around mid-Sept 2021.

CapitaLand shares last closed at $3.81 on July 16.