The cash offer by property tycoon Simon Cheong to take his flagship company SC Global Developments private is “fair and reasonable”.
That is the view of the independent directors of the luxury property development firm after taking into account recommendations from an independent financial advisor (IFA).
In a company circular to shareholders on Wednesday, the independent directors recommended that shareholders accept the cash offer of S$1.80 per share.
Mr Cheong made the cash offer earlier this month through his wholly-owned investment holding company, MYK Holdings Pte Ltd.
The offer price values the luxury property developer at approximately S$745 million.
Mr Cheong currently holds a 55.06 per cent stake in SC Global and plans to de-list the company from the Singapore Exchange.
DBS Bank has been appointed as financial adviser to the offeror.
Meanwhile, PrimePartners Corporate Finance has been appointed as the IFA to advise independent directors on the offer.
Among the factors that support the offer include the dwindling sales in the luxury property market.
The IFA said the revenue of the “Group had declined significantly by approximately 39.7 per cent year-on-year from S$680.4 million in 9M2011 to S$410.6 million in 9M2012 largely due to slower sales”.
This “indicates that the high-end residential property market in Singapore is expected to remain cautious, with sales remaining tepid and prices stagnating or declining in the foreseeable future”.
Another factor in support of the cash offer is its attractive premium.
The IFA said the offer price is at a premium of approximately 15.4 per cent over the unaudited net asset value (NAV) per share of the company of S$1.56 as at 30 September 2012.
This is “despite the shares having consistently traded at a discount of between 17.3 per cent (and) 39.4 per cent” over the last one year.
Meanwhile, the thin trading liquidity of the shares is also a factor which favours the offer.
The IFA said that over the last two years, “daily average trading volume of the shares was only approximately 236,675 units, representing about 0.27 per cent of the company’s free float”.
Source : Channel NewsAsia – 27 Dec 2012