SC Global Developments Ltd. dropped to a two-week low after an independent financial adviser said Chief Executive Officer Simon Cheong’s S$745 million ($609 million) buyout offer is “fair and reasonable.”
The stock, which had closed above Cheong’s offer price of S$1.80 for 11 days, declined 1.6 percent to S$1.895 at the close of Singapore trading, the lowest since Dec. 13. Prime Partners Corporate Finance Pte, the Singapore luxury developer’s independent adviser, recommended shareholders accept Cheong’s offer, according to a circular to investors yesterday.
Traders had been betting the most lucrative takeover offer in Singapore will get even sweeter for the luxury property developer. At 61 percent more than the stock’s 20-day average, Cheong offered the biggest premium for any acquisition of a developer in Singapore on record, according to data compiled by Bloomberg. Since then, SC Global’s second-largest investor, Wheelock & Co., bought shares above the deal price, and the stock closed at S$1.91 last week, indicating traders expect Cheong to pay more.
“As Simon Cheong and concert parties already owned 60.74 percent of SC Global, there is also no likelihood of a counter-offer from third parties,” Goh Han Peng, an analyst at DMG & Partners Securities Pte, said in a report today. “Wheelock with its 16 percent stake in SC Global now holds the key as to whether Simon Cheong will be able to successfully privatize SC Global.”
The stock rose to the highest in almost five years on Dec. 17 after Wheelock said it bought 1.07 million shares at S$1.81, exceeding Cheong’s offer price. Wheelock, also a developer, said it named Goldman Sachs Group Inc. as its financial adviser in relation to Cheong’s offer.
“A possible compromise, in our view, is a merger of the two companies, which we see as highly complementary given the common focus on the luxury end of the residential market,” Goh said. “Wheelock gets to replenish its landbank in one stroke while SC Global gets the backing of Wheelock’s strong balance sheet.”
Still, sales have slowed after Singapore took steps to discourage speculation in real estate, requiring foreigners to pay an additional 10 percent tax on property purchases and adding levies on second or third homes. Amid fluctuating sales, SC Global reported losses in three of the four most recent quarters, and earnings are expected to fall 79 percent in 2012, analysts’ estimates compiled by Bloomberg show.
When Cheong made the offer, he said that an unlisted company would have more flexibility if it didn’t have to report results on a quarterly basis and said that SC Global hasn’t tapped capital markets in at least six years.