ARA founder leads consortium in buyout at 26% premium

ARA Asset Management Ltd group founder and chief executive officer John Lim is leading a consortium that includes Cheung Kong Property and Straits Trading Company to take the group private at S$1.78 a share.

Teaming up with them in the buyout through a scheme of arrangement are US private equity firm Warburg Pincus and AVIC Trust Co, a unit of the Shanghai-listed AVIC Capital Co.

The consortium said that the move would enable ARA to leverage the networks of its new strategic partners and gain greater access to capital as it scales up its business.

The scheme also offers shareholders the chance to realise their investment in the stock, whose historical trading liquidity has been low.

Mr Lim said in a statement on Tuesday: “A deeper capital base well-positions ARA in executing its business strategies going forward, including tapping growth opportunities through the network of our new partners.”

The offer price, which is final, values the company at S$1.78 billion based on its total issued shares. It is 26.2 per cent more than the stock’s Nov 2 closing price of S$1.41, and represents a 29.6 per cent premium to the one-month volume-weighted average price (VWAP).

ARA shares had jumped 6 per cent to a 52-week high of S$1.495 in active trade on Nov 3, before a trading halt was imposed. Trading of its shares will resume on Wednesday morning, following the offer announcement.

Under the scheme of arrangement, the offeror is a special-purpose vehicle, Athena Investment Company (Cayman) Limited, an entity indirectly owned by affiliates of Warburg Pincus and AVIC Trust.

Straits Trading, Cheung Kong Property and Mr Lim, through JL Investment Group, collectively owned 46.24 per cent of ARA as at Nov 8. They will transfer their shares to the offeror in return for cash and shares in the offeror’s holding company Athena Investment Company (Singapore) Pte Ltd.

Following the privatisation, these existing shareholders will remain significantly invested in ARA, holding a collective 48.8 per cent interest through their respective stakes in the holding company. Warburg Pincus will hold 30.72 per cent, and AVIC Trust Co, 20.48 per cent.

Mr Lim will continue to helm ARA as chief executive of the offeror; current ARA chairman Justin Chiu will serve as chairman of the holding company.

Founded in 2002 by Mr Lim with the backing of Asia’s richest man Li Ka-shing, ARA was listed in November 2007 with a market cap of S$669.37 million and real-estate assets under management (AUM) of US$4.7 billion.

It has since grown into a S$1.49 billion company by market cap, managing assets worth S$30 billion as at June 30. These include assets held by private funds and eight Reits, including Suntec Reit, Fortune Reit and Cache Logistics Trust in Singapore and Hui Xian Reit in Hong Kong.

The consortium pointed out that ARA will require a significant amount of capital to further its growth through co-investments into existing and new funds, as well as through opportunistic acquisitions.

“Should it remain a listed company at this scale, raising capital successfully will take time and will be highly dependent on market conditions. Such capital raisings also entail costs and may result in the dilution of shareholders’ interests,” the consortium said in a statement on Tuesday.

ARA’s last rights issue, which took place in December last year, raised net proceeds of about S$150 million, with the rights units priced at a 29.6 per cent discount to the last-traded price before the rights issue announcement.

Since late 2013, Straits Trading has held the largest stake of 20.1 per cent in ARA; this was after it acquired shares at S$1.733 each from Mr Lim and Cheung Kong Property, which is controlled by Mr Li. Straits Trading and Mr Lim also set up a S$950 million co-investment vehicle to provide seed capital for new fund products to be managed by ARA.

Straits Trading executive chairman Chew Gek Khim said the consortium believes that the two strategic partners “will create value and opportunities to support ARA’s future growth”, given their deep experience and wide business networks.

The scheme of arrangement requires the approval of at least 75 per cent of the value of shares of the voting shareholders and more than half of shareholders being present and voting in person or by proxy. It is also subject to other regulatory approvals and court sanction. The consortium shareholders and concert parties will not vote on their shares at the meeting.

Goldman Sachs (Singapore) and DBS Bank are joint financial advisers for the deal. Deloitte & Touche Corporate Finance has been appointed the independent financial adviser to make a recommendation to shareholders on the scheme.

If the deal goes through, it is expected to be completed in the first half of next year.

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