Investors made a dash for Wheelock Properties (Singapore) yesterday after its Hong Kong-listed parent offered to take the mainboard-listed property developer private.
The shares jumped at the opening bell after a three-day trading halt was lifted and soon breached the $2.10 offer price.
It closed at $2.18, up 44 cents or 25.3 per cent, a sign that investors expect the buyout bid to go up. Around 26.3 million shares changed hands - compared with an average daily turnover of about 740,000 over the past year.
The $2.10 offer - higher than any closing price since January 2010 - marks a premium of 20.7 per cent over the counter's close at $1.74 last Friday, ahead of the trading halt.
The voluntary offer by Wheelock and Company, which already owns 76.21 per cent of the company, is unconditional, the Singapore company announced yesterday.
A deadline for acceptances has not been announced, but DBS, Wheelock's financial adviser for the buyout, said that the earliest expected closing date will be Sept 7.
The offer price values the company at $2.51 billion, with a back-of-the-envelope sum showing that Wheelock and Company would fork out $597.7 million for all the shares it does not already own.
Wheelock Properties owns Scotts Square and Wheelock Place in the Orchard Road shopping belt. Recent residential developments include The Panorama and Ardmore Three, alongside other projects in the portfolio such as Grange Residences and Parc Oasis.
Wheelock and Company said delisting Wheelock Properties would mean more flexibility to manage the business and allow it to optimise its management and capital resources.
It also lets investors cash out amid low trading liquidity. The average daily trading volume has represented just 0.053 per cent of all issued shares over the past year.
OCBC Investment Research analyst Deborah Ong said she was unsurprised by the offer, especially after the real estate sector slump on the back of recent cooling measures: "Wheelock Property (Singapore) has been trading with a depressed price-to-book valuation (and) has a strong shareholder with a majority controlling interest, as well as a net cash position - all these traits make it ripe for the picking."
But she added: "We believe the offer price of $2.10 came in at the low end, and it is 10.3 per cent below our fair value of $2.34."
Mr Royston Foo, who covers property for Smartkarma, said the offer price fell below his fair value estimation of $2.66, adding that the share surge yesterday "seems to indicate an expectation of a possible higher offer price".
He added that the fragmented minority share ownership could hinder Wheelock and Company reaching the 90 per cent threshold for compulsory acquisition.
"Investors are likely to hold on to their shares as they observe the level of acceptances and wait for a possible revision of offer. In such a situation, Wheelock and Company will be forced to sweeten the offer to get more acceptance," he said.
Various stock watchers have been eyeing a potential buyout of the company for some time. In June last year, Phillip analyst Peter Ng had called Wheelock Properties a "prime privatisation candidate". The brokerage initiated coverage with a "buy" call and a $2.28 target price.
The offer document will be sent to shareholders within three weeks. The Wheelock Properties board will appoint an independent adviser to guide independent directors. Its findings will also be sent to shareholders.