The Yanlord Perennial Investment (YPI) consortium looks to be taking a roundabout approach with its latest investment.
The group's strategy stems from its move in July when it took control of United Engineers (UE) and bought a small stake in WBL.
It is now using UE to make a cash offer for WBL.
Last Thursday, UE offered to pay $2.07 per share for the WBL stock it does not already own. This is the same price that Yanlord Perennial paid OCBC for its WBL stock in July.
Smartkarma insight provider Foo Sze Ming wrote in a note last Friday: "This transaction is not exactly the outcome that we have previously envisaged. It appears that Yanlord Perennial Investment ( has chosen to take a more cautious, risk-management approach towards its UE investment."
YPI controls UE and is an interested party so the deal will first be put to a vote with the rest of UE's shareholders, including mid-cap developer Oxley Holdings.
Mr Foo wrote: "We had thought that YPI might want to take control and actively manage WBL to extract the maximum value from the company. But it seems that YPI's preference is to let UE's current team manage WBL instead and forgo the potential upside."
YPI owns 10 per cent of WBL and is committed to acquiring a further 19.9 per cent from OCBC and related parties unless an outside party entity makes a competing bid before the end of business today.
If YPI accepts the cash offer from UE, it will swap the 29.9 per cent stake for $174 million in cash.
"This will reduce YPI's overall investment in UEL/WBL by 23.8 per cent, from $730 million to $556 million," Mr Foo noted.
UE's offer implies a valuation of $582 million for WBL, which is below its net tangible asset (NTA) value of $699.2 million, based on third-quarter financial statements.
Oxley has a 15 per cent stake in UE. Oxley chief executive Ching Chiat Kwong declined to comment on the offer as he did not want to affect its outcome.
"Oxley is a major shareholder so we shouldn't comment," Mr Ching said.
WBL was delisted from the SGX in 2014. UE owns 67.6 per cent with 2.5 per cent is in public hands.
Mr Foo believes the deal is positive for UE shareholders, since YPI is transferring its stake in WBL to UE at its original cost. This will raise UEL's net tangible asset and improve its valuations.
"This is the sweetener for UE's shareholders in return for the higher balance sheet risk resulting from the transaction," he added, since UE would have to take on more debt for the cash offer.
SAC Capital Private is the independent financial adviser and will deliver its opinion on the deal to UE shareholders before the extraordinary general meeting is called. UE said the $2.07 per share offer price was arrived at after negotiations with YPI, taking into account that certain WBL shareholders had publicly disclosed that they were willing to divest their shares.
UE shares closed at $2.64 on Friday, up four cents or 1.54 per cent.
