So near and yet so far - UOL fails in bid to take over UIC

http://www.businesstimes.com.sg/sub/...21874,00.html?

Published March 4, 2009

So near and yet so far - UOL fails in bid to take over UIC

By NISHA RAMCHANDANI


(SINGAPORE) UOL Group's $1.15 billion bid for the shares it does not own in United Industrial Corp (UIC) has failed, narrowly missing the mark by garnering only 48.94 per cent of the voting rights in UIC.

The takeover was conditional upon the offerer and parties acting in concert with it getting more than 50 per cent of the voting rights. UOL's offer closed at 5.30pm yesterday, with acceptances representing 3.37 per cent of total issued shares. Prior to the offer, UOL and the relevant parties held about 30.2 per cent of UIC.

A further stake of approximately 15 per cent was acquired or agreed to be acquired after the offer announcement date.

Because of the lapsing of the offer, UOL, controlled by UOB chairman Wee Cho Yaw, will not be making an offer for Singapore Land - the jewel in the UIC crown.

Previously, UOL had said that if it gained control of more than half of UIC, it would make an offer for Singapore Land at $3.57 per share.

Analysts have previously viewed the $1.20 per share bid price for UIC as unattractive. They also thought that shareholders - including Filipino tycoon John Gokongwei Jr with a 35 per cent UIC stake - were unlikely to accept the offer. Mr Gokongwei himself had tried to take over UIC in 2005.

UOL later defended its price offer, saying that 'various factors, including the continuing volatility in global credit and capital markets, the difficult economic conditions, and a deteriorating property market in Singapore' had been taken into account.

UOL made the mandatory cash offer after the stake in UIC held by the group and its related parties crossed the trigger mark of 30 per cent to 30.2 per cent, from approximately 29.1 per cent.

The offer represented an opportunity to 'better align the strategic objectives' of UIC and UOL, UOL had said previously. UOL and UIC have joint investments in retail commercial and hotel projects.

http://www.todayonline.com/articles/305445.asp

Wednesday, March 4, 2009

UOL now UIC’s top shareholder

Kelvin Chow

[email protected]


The long-drawn battle to control United Industrial Corp (UIC) reached another milestone yesterday, after UOL Group overtook Philippine tycoon John Gokongwei to become its largest shareholder despite failing in an attempt to take over the property developer.

UOL, a property giant whose largest shareholder is the family of United Overseas Bank chairman Wee Cho Yaw, had offered to buy all the UIC shares it does not own at $1.20 apiece, valuing the developer at $1.65 billion. Mr Wee is also chairman of both UIC and UOL, while Mr Gokongwei is UIC’s deputy chairman.

At the time of the offer inmid-January, UOL had a stake of 30.2 per cent in UIC. It had to make the mandatory offer after purchases from the open market lifted its stake above the 30 per cent threshold stipulated the Singapore Takeover Code.

At the close of the offer yesterday, not enough UIC shareholders accepted the offer for the takeover to succeed. According to a regulatory filing with the Singapore Exchange (SGX), UOL managed to garner only 48.9 per cent of the developer, shy of the 50 per cent plus one share needed to make the offer unconditional.

Those who have accepted the offer will have their shares returned.

However, after purchasing from the open market as well as a stake of about 12 per cent from Morgan Stanley Investment Management, UOL’s interest in UIC has risen to the current level of 45.6 per cent, according to the SGX filing. This makes UOL the biggest shareholder of UIC.

Mr Gokongwei, who used to be the biggest shareholder, was also buying up UIC’s shares in the open market, but in much smaller amounts. According to a regulatory filing with the SGX, his stake is now about 35.3 per cent, up marginally from 35.1 per cent in mid-January.

The failure by UOL to take over UIC yesterday also means it will not be making an offer for Singapore Land (SingLand), in which UIC has a 72.4-per-cent stake. Still, with its increased stake in UIC, UOL will have tighter control over SingLand, which owns many commercial properties here and is considered by many as the crown jewel of UIC’s assets.

UOL’s inability to garner more than 50 per cent of UIC through its offer came as little surprise to analysts, some of whom had previously said the $1.20 price was too low.

Indeed, just last month, UIC’s independent financial adviser ING Bank, said UOL’s offer was “not fair.” ING told UIC’s directors that it should advise shareholders who hold a long-term view or confident about the company’s prospects to reject the offer.

http://www.straitstimes.com/Money/St...ry_346105.html

March 5, 2009

NEWS ANALYSIS

Wee Cho Yaw seizes the day

His UOL gains more control over UIC despite losing takeover bid

By Lee Su Shyan, Assistant Money Editor


SOME victories prove to be hollow.

But for veteran banker Wee Cho Yaw, 81, an apparent loss in the takeover battle for United Industrial Corp (UIC) probably means he has won the wider war.

Late on Tuesday, United Overseas Land (UOL) - through which Mr Wee made his takeover bid - announced that it had managed to secure shares to control only 48 per cent of UIC, falling just short of the 50 per cent target.

But this result has almost certainly been a blessing in disguise.

In January, UOL had made a takeover bid for UIC - and its prized asset office landlord Singapore Land (SingLand) - at $1.20 a share. This was at a slight premium to UIC's then market price of $1.10 a share.

Mr Wee was probably prompted to make his move by stirrings in the other camp at UIC - led by Filipino tycoon John Gokongwei.

For many years, Mr Wee and Mr Gokongwei have been practically neck and neck in terms of shareholdings, although Mr Wee is the chairman, which gives him a slight edge in decision making.

In 2005, Mr Gokongwei triggered a general takeover after crossing the threshold of 30 per cent, making an offer at $1.09 per share. That failed after generating little investor support.

However, on the plus side, Mr Gokongwei was still allowed to continue to buy shares, but not more than 1 per cent every six months. He has since inched up to about 35 per cent of UIC.

Meanwhile, Mr Wee, together with UOL, United Overseas Bank and Haw Par, was trailing him at 29 per cent.

They could not cross 30 per cent unless they were prepared to make a general takeover offer.

So while Mr Gokongwei was raising his stake, Mr Wee's hands were tied.

When Mr Wee triggered a takeover bid by getting to 30.2 per cent, many did not expect investors to accept as the price was low. They believed that the exercise was more for Mr Wee to be able to raise his stake every six months, just as Mr Gokongwei had done.

But one other factor - the financial crisis - seems to have worked in Mr Wee's favour and given him much more of an upper hand at UIC than was earlier expected.

What usually happens with an unattractive offer price is that only a few people accept. The offer fails and the buyer's shareholding remains the same as he has to return the shares.

In this case, Morgan Stanley sold a chunk of UIC shares - 9 per cent - directly to UOL. In total, about 15 per cent was bought on the open market or from institutional investors.

These moves circumvented the scenario of Mr Wee being left where he started off if the offer were to fail - which it ultimately has - and the shares being returned to the shareholders.

With the markets plunging, these big boys probably decided they should cut their losses and just raise hard cash.

Their actions have helped to give Mr Wee control of 45 per cent - after 3 per cent was returned to shareholders who accepted the offer - way more than Mr Gokongwei's stake.

At the same time, Mr Wee had a lucky break - in that Mr Gokongwei did not accept his offer. That meant Mr Wee did not have to cough up too much as he did not cross the 50 per cent mark.

He has spent only about $240 million for the 15 per cent, compared with roughly $1 billion plus if he had been forced to buy up all the shares of UIC, plus make an offer for all the shares of SingLand.

Now UOL can enjoy the synergies that it talked about - from having more control over UIC.

And UOL as good as controls SingLand through its 45 per cent stake in UIC.

Another piece of good news for UOL shareholders - UOL will see a gain from upping its investment in UIC.

Goodwill means paying more for an investment than its value. The difference is usually treated as an expense. Conversely, there is negative goodwill, which essentially is paying less for an investment than its value.

Paying $1.20 for UIC's shares with a net asset value of $2.48 gives a negative goodwill number of a few hundred million dollars which will now be added to UOL's bottom line.

All in all, Mr Wee, in his usual inimitable style, has wound up with a good deal.

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http://www.businesstimes.com.sg/sub/...23249,00.html?

Published March 12, 2009

Depressed market changes takeover wisdom

By UMA SHANKARI


IT'S common market wisdom that to succeed, a takeover bid has to offer an attractive premium.

But the outcome of the latest takeover bid in town should lead to a re-examination of this view.

Last week, UOL Group said that its $1.15 billion takeover offer for United Industrial Corp (UIC) had failed. At the time of the offer's close, UOL had garnered only 48.94 per cent of the voting rights in UIC; the offer was conditional upon UOL gaining control of more than 50 per cent of voting rights.

This means that UOL had to return the shares that it had obtained through the general offer - about 3 per cent - to shareholders. But it got to keep the 15 per cent that it bought on the open market or from institutional investors.

The popular reading is that the outcome was what veteran banker Wee Cho Yaw, who controls UOL, wanted. This way, he gets to raise his stake in UIC to more than what Filipino tycoon John Gokongwei (UIC's second largest shareholder) holds - without having to make an expensive offer for Singapore Land. Under the chain-rule principle, UOL would have been obliged to make an offer for UIC subsidiary SingLand at $3.57 per share had its stakeholding in UIC crossed 50 per cent.

But what is even more interesting than the outcome is how close the offer came to succeeding. Without even trying really hard, and offering a price that was widely seen as unattractive, UOL came close to gaining control of UIC.

In fact, the independent financial adviser appointed by UIC to evaluate the takeover bid had told shareholders that the offer price of $1.20 a share was 'not fair'. Usually, when an offer price is judged to be unattractive, the offer fails with the buyer's shareholding remaining more or less the same as before. Analysts also commented in this case that they do not expect much from the offer.

However, what transpired was that some shareholders decided to use the offer to exit their holdings in UIC. In particular, it emerged that UIC's then-third largest shareholder Morgan Stanley had sold about about 9 per cent of UIC shares directly to UOL.

And the actions of Morgan Stanley and other investors seem to indicate that they expect the outlook for the market here - and property stocks in particular - to worsen.

It also shows that unlike in the past, offering a large premium when making a bid for another company may no longer be needed in the depressed market - there are shareholders who are looking to cut their exposure even at a slight premium. This should offer opportunities for companies with cash on hand to buy up other companies that they have been eyeing for some time.

Before UOL's offer for UIC, the last takeover of a major property company in Singapore was done by CapitaLand, which in January 2008 paid a premium of 43 per cent to the last traded price to take its serviced residence unit The Ascott Group private. The offer price was also at a premium of about 145 per cent to Ascott's unaudited net asset value per share as at Sept 30, 2007. The market was just getting into a slowdown then.

But things have turned a lot worse since. In line with this, UOL's offer price for UIC was just 9.1 per cent higher than UIC's last transacted price of $1.10 at the time that the offer was made. The offer price was also some 51.6 per cent lower than UIC's net asset value per share of $2.48 as at Sept 30, 2008. Yet, the offer was enough to entice shareholders holding a significant chunk of the company to part with their shares - whether through the open market, by selling directly to UOL, or accepting the general offer itself. That, and what it means for future takeovers, is worth a headline all in itself.