Investors hoping for a takeover offer from banking tycoon Wee Cho Yaw have been left disappointed, at least for now.
UOL, the property flagship company of Dr Wee, is raising its stake in United Industrial Corp (UIC) from 44.7 per cent to 48.9 per cent via a share swap with Haw Par Corp, another Wee family-controlled entity.
The share swap does not mark a big change in the influence that UOL already has over UIC.
Dr Wee is the chairman of both firms, which already hunt together for deals, the most recent being the collective purchase of Raintree Gardens in Potong Pasir.
Maybank Kim Eng analyst Derrick Heng called the share swap a "paper exercise with minimal impact on UOL".
But Dr Wee's little bit of housekeeping does mean a takeover offer by UOL for UIC - which would make UOL one of the largest owners of commercial space here - is still a catalyst to watch.
In its filing to the Singapore Exchange yesterday, UOL said the share swap was done "with a view to achieving statutory control of UIC in the future", or aggregate holdings of more than 50 per cent.
If UOL can buy over UIC entirely, new projects could be unlocked. For instance, UOL owns a 22.7 per cent stake in Marina Centre Holdings, a holding firm which owns the Marina Square mall and has stakes in its neighbouring hotels - Mandarin Oriental, Marina Mandarin and Pan Pacific Singapore. UIC also owns a large 53 per cent stake in Marina Centre Holdings.
Mr Heng said: "If they (UOL) want to redevelop that area right now, minorities can still have a say. But if they have everything, they can do whatever they want."
For now, the details of the share swap mainly concern accounting.
Although UOL holds less than 50 per cent of UIC after the share swap, it is claiming "de facto control" over UIC, by virtue of being UIC's largest shareholder.
This allows UOL to consolidate UIC's earnings into its books, as it would for a subsidiary. Pro-forma disclosures suggest the adjustment would have given UOL a $332.7 million earnings gain last year.
But punters hoping for a takeover offer got none, and UIC shares fell four cents or 1.22 per cent to $3.24 in a dismissive shrug, while UOL shares fell eight cents or 1.04 per cent to $7.60. Besides, both counters had rallied since the end of last month, possibly on a news leak. Haw Par shares closed 11 cents or 0.97 per cent lower at $11.20.
Private investor Goh Han Peng said: "I think people were expecting more. This is not a full consolidation; UOL didn't make a general offer. But this deal is good for both UOL and Haw Par shareholders.
"UOL gives a better dividend yield, and Haw Par is switching its investment from a less liquid counter to a more liquid one with better earnings potential."
Although Haw Par has 69.6 million UIC shares, UOL is buying only 60 million. In doing so, it avoids crossing the 49 per cent threshold that would force it to make a general offer for UIC.
Haw Par will swap every 2.2 UIC shares for one share in UOL. This puts a premium on UIC shares of 3.2 per cent versus the swap ratio of 2.27 implied by the volume- weighted average trading prices for both counters in the three months to June 20.