Published May 14, 2007

Citadel hedge fund to buy 25% of Chip Eng Seng

Deal will include big stakes bought from nine major shareholders


A CHICAGO-BASED hedge fund is paying some $83 million to buy a 25 per cent stake in homegrown construction and property firm Chip Eng Seng Corp.

Chip Eng Seng said over the weekend that the Citadel Equity Fund, part of the Chicago-based Citadel Investment Group, had agreed to pay 50 cents a share in cash for 60.7 million new shares in the firm, or $30.4 million for a 9.1 per cent stake in its enlarged share capital.

The firm said it would use the proceeds from the share sale for acquisitions and investments in real estate and construction, and for general working capital.

The deal is conditional on Citadel completing due diligence on the firm and its subsidiaries. The price of 50 cents a share is about 8 per cent higher than the firm's weighted average share price over the previous 30 days, said the firm.

In a separate agreement signed last Friday, Citadel bought another 39.4 million Chip Eng Seng shares from nine major shareholders in the firm. The nine have also agreed to sell an additional 66.7 million shares to the fund, subject to certain conditions, which the firm did not specify.

Assuming Citadel pays the same price of 50 cents each for all the shares it buys in the firm, the combined deal will cost it a total of $83.4 million and give Citadel a 25 per cent stake in Chip Eng Seng.

The nine people selling their shares in the firm include its founder and executive chairman Lim Tiam Seng, managing director Lim Tiang Chuan, and executive director Lim Ling Kwee.

Citadel is already a project partner of Chip Eng Seng's. Last September, the two joined forces to buy and redevelop Grange Tower at Grange Road in a collective sale. They paid $180 million or $1,207 per square foot of potential gross floor area for Grange Tower, which is being redeveloped into a 68-unit luxury condominium.

Chip Eng Seng is also working with other foreign funds. In July last year, the firm formed a joint venture with a private equity real estate fund owned by US investment bank Lehman Brothers.

The partners propose to build a 70-unit luxury condominium at Peck Hay Road, and another private condominium comprising 668 units at West Coast Road/Walk.