Hotel Properties (SGX: H15) had jumped more than 10% to close at S$3.52 yesterday after its main shareholders announced their intentions to take the company private.
Hotel Properties owns and manages 28 hotels in 13 countries. It also has interests in property development in the Singapore and Thailand markets. Lastly, it owns 10 Hard Rock Café outlets in South East Asia and holds the franchise rights for premium ice-cream brand Haagen-Dazs in Singapore and Malaysia.
In yesterday’s announcement, a consortium – including Hotel Properties’ managing director Mr. Ong Beng Seng and Wheelock Properties (SGX: M35) – had offered S$3.50 per share for the remaining 42% stake in Hotel Properties that they do not yet own for a total sum of around S$750 million. That is roughly a 12% premium to its last traded price of S$3.13 before the announcement. The offer price values the company at 10.6 times trailing earnings and 1.13 times its book value. Excitement regarding the offer has not abated yet, given how Hotel Properties’ shares have gained another 4.3% to S$3.68 as of the time of writing (10am, 16 April 2014).
This is the third major real estate-related privatisation offer in Singapore this year and comes almost right after real estate giant CapitaLand’s (SGX: C31) S$3.06 billion Monday bid for its subsidairy, the retail mall developer, owner, and manager CapitaMalls Asia (SGX: JS8). Earlier this year in February, United Industrial Corp (SGX: U06), another major real estate developer in Singapore, also offered to privatise its 80.36%-owned subsidiary Singapore Land (SGX: S30) at a price of S$9.40 per share, which works out to a total sum of around S$760 million. This rounds up the trio of major privatization offers in the real estate sector.
It seems that major shareholders of property counters are viewing the slowdown of Singapore’s property market and the declining share prices of property-related shares as an opportunity to consolidate their investments and take them private.
Who might the next target be? That’s really anyone’s guess. But, property companies with a small group of owners that hold majority stakes include GuocoLeisure Ltd (SGX: B16), Pan Pacific Hotel (SGX: H49), and Global Premium Hotel (SGX: P9J).
GuocoLeisure is majority-owned by the Hong Kong-listed Guoco Group, which in turn has the Quek family as its major shareholders. Pan Pacific Hotel is also related to United Industrial Corp which is controlled by the Wee family of Singapore. Elsewhere, Global Premium Hotel is a subsidairy of Fragrance Group (SGX: F31), which is controlled by Mr. Koh Wee Meng, one of the richest persons in Singapore.
In any case, it really is up to anyone’s guess on how these companies’ futures might play out over the next few years. But, if Singapore’s property market continues to soften without any signs of impending rebound, then we might yet see even more consolidations in the future.
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