UOL, which already owns 81.6 percent of Singapore-based Pan Pacific, offered to buy remaining shares of the hotel operator at S$2.55 apiece, according to a statement to the Singapore stock exchange. That’s a 9 percent premium from yesterday’s close.
“In the last five or six years, UOL has done a lot of things to consolidate their assets,” said Donald Chua, an analyst at CIMB-GK Pte. “This is really another move to consolidate.”
The proposed buyout comes after shares of Pan Pacific have risen almost 30 percent over the last year, reaching a high of S$2.54 on Feb. 27. The stock is trading at 19.7 times earnings, compared with the average multiple of 26.5 for hotels and restaurant operators in Singapore, according to data compiled by Bloomberg.
“The exit offer will provide an exit option for those shareholders who wish to realize their entire investment in the shares but find it difficult to do so as a result of the low trading liquidity of the shares and low free float of the shares,” UOL said in the statement.
Both UOL and Pan Pacific were suspended from trading this morning. Pan Pacific shares closed at S$2.34 yesterday, giving it a market value of S$1.4 billion, while UOL ended at S$7.26, giving it a market value of S$5.6 billion after the stock climbed 68 percent in the past year.
UOL said it has no plans to change Pan Pacific’s business. The company said the hotel operator hasn’t tapped the markets for funds in 20 years except for a rights offer in 2007, adding that it’s unlikely it will need financing.
Pan Pacific manages more than 30 properties in the Asia-Pacific region and in North America. It runs 13 hotels under the Parkroyal brand, targeting both business and leisure travelers.
Chua said that other UOL-linked companies such as United Industrial Corp., or UIC, and Singapore Land Ltd. (SL) may be the next targets for the company, if Pan Pacific is taken private. UOL owns 43 percent of UIC, making it the biggest shareholder. UIC in turn owns 80 percent of Singapore Land, a landlord in the city’s central business district.
“The speculation is that if this is privatized, then most people will start looking at UIC and SingLand to be the next target,” Chua said. “That will probably be the final puzzle but the timeline for that is very, very uncertain as this saga has been ongoing for a decade or more already.”
UOL’s plan would make Pan Pacific the second Singapore property-related company to be taken private in the past five months. SC Global Developments Ltd.’s Chief Executive Officer Simon Cheong offered to pay S$745 million in December to take his Singapore luxury property developer private.
Cheong, who already owned 55 percent of the company at that time, said he made the bid because it has not accessed the capital markets for funds for at least six years and low liquidity of shares “limits the usefulness of a public listing.”
Pan Pacific opened its 367-room Parkroyal on Pickering in January, boosting the number of rooms in Singapore’s Raffles Place financial district by 57 percent.
Singapore was ranked Asia’s most-popular business destination in the first half of 2012, according to a survey of 2,500 people in nine countries by Accor SA. (AC) Conventions, conferences and tradeshows in Singapore rose 46 percent to 2,130 in 2011 from 2010, according to the Singapore Tourism Board.
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