SINGAPORE (Dec 19): City Developments Limited (CDL) has issued a letter from its chairman, Kwek Leng Beng, urging shareholders to consider “the very material premium and value” that is available to them under the latest and final offer of 620 pence per share for the privatisation of Millennium & Copthorne (M&C) hotels.
The letter, which was published last evening and can be found on the group’s website, said CDL’s board was concerned about the outlook for trading in the hotel industry; the disruptive impact this investment programme will have on the short term operating performance of the hotels; and the impact on all shareholders – as there will be a need for CDL to balance the impact of increased leverage with the ability to distribute returns to shareholders.
Kwek adds that the board is mindful of certain long-term M&C shareholders’ comments that the size of CDL's stake reduces liquidity in M&C’s stock, and impacts the coverage by equity-research analysts which the group believes to impact its attractiveness to potential new shareholders.
As such, it has concluded that the offer is in the best interests of all M&C shareholders, as it affords minority investors to exit their holdings at a material premium to the share price prior to the offer.
Citing other arguments made “by a small number of shareholders” that the final offer should be based on NAV, Kwek argues that these valuations only exist in theory and would only jeopardise the interests of other shareholders, as attempts to made to crystallise these theories would “prove ethereal”.
The chairman further highlights CDL's commitment to maintaining M&C’s strategy as both a hotel owner and operator, in light of its long-term recurring income stream, and therefore underscores that it has no intention to sell any of M&C’s hotels in London and New York over the next 1 to 3 years.
“Reinforcing this point, CDL has kept a separate business group for its property development business in Asia and in every major international market in which it operates, including in the UK, where CDL has extensive property interests and has recently acquired significant land assets for its own development,” writes Kwek.
“Moreover, history has also shown that even though CDL is a controlling shareholder of M&C, CDL rarely sells its hotel assets. It should be noted that over the years, M&C’s most high-profile sale was the New York’s Plaza Hotel in 2004, which was a joint venture property… Should the final Offer not be accepted, CDL is fully prepared for M&C to address the operating challenges it faces as a public company, with all shareholders sharing the burden of the significant capital expenditure that is required simply to bring the M&C hotels into line with their competitors,” he adds.
This story, written by Michelle Zhu for The Edge Singapore, first appeared on Dec 19.