OCBC tips rejecting takeover bid for Wheelock Properties

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OCBC advised shareholders of Wheelock Properties reject the takeover offer, noting that the bid was well below its fair value on the stock.

Hong Kong real estate giant Wheelock and Company launched on Thursday a takeover offer for Wheelock Properties (Singapore) in a deal that values the Singapore unit at over S$2.5 billion. The offer price of S$2.10 in cash marks a 20.7 percent premium over the last transacted price prior to the announcement.

But OCBC noted its fair value estimate of S$2.34 was 11.4 percent above the offer price.

“Given the substantial gap between our fair value estimate and the offer price, we encourage investors to REJECT THE OFFER,” it said in a note on Thursday, which included the emphasis. OCBC previously had a Buy call on the stock.

OCBC noted that the offerer would acquire Wheelock Properties’ portfolio of investment assets as an around 30 percent discount. In addition, it estimated the offer effectively priced Wheelock Properties’ indirect stake in Hotel Properties Ltd. at around S$3.61 per HPL share, which is near the current market price.

“We believe it is possible that 20 HK [Wheelock & Co.] sees further value beyond the current market value of HPL – in particular, we peg a higher probability that the West Orchard redevelopment is finally within sight,” it said.

OCBC noted that in 2014, it had cited the potential for HPL and Wheelock Properties to redevelop their “neglected assets” at the western end of shopping belt Orchard Road into a mega-development.

“We believe that should the privatization of WPS be successful, the lack of minority shareholders could help smoothen the path towards a West Orchard redevelopment,” it said.

OCBC also pointed to the possibility that the offer may not succeed in delisting Wheelock Properties.

“Due to the low liquidity of the stock, we find it possible that the unconditional offer may not easily pass the 90 percent threshold upon which acceptance of the offer by minority shareholders is compulsory,” it said.

Shares of Wheelock Properties were up 0.46 percent at S$2.19 at 9:25 A.M. SGT.


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