SC Global Developments Ltd., Singapore’s luxury developer, dropped the most in almost three months after saying Chief Executive Officer Simon Cheong doesn’t plan to raise the price in his buyout offer.
Cheong “has no intention of increasing the offer price” of S$1.80 per share, the company said in filing to the Singapore stock exchange yesterday. The offer will close on Jan. 16, according to the statement. The stock, which has closed above Cheong’s offer price for 14 days, declined 4 percent to S$1.825 at the close of trading in Singapore. The shares posted their biggest decline since Oct. 8.
Cheong’s S$745 million ($609 million) buyout offer is “fair and reasonable,” Prime Partners Corporate Finance Pte, an independent financial adviser, said on Dec. 26, recommending shareholders accept the offer, according to a circular sent to investors.
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$1.90 last week, indicating traders expect Cheong to pay more.
“The risk is that if Wheelock doesn’t tender shares, then they may not be able to completely get it privatized and then they could incur heavy extension charges,” said Vikrant Pandey, a Singapore-based analyst at UOB Kay Hian Pte, which advised investors to sell SC Global shares in the offer.
As a company with foreign shareholders, SC Global faces fines for failing to sell units within two years of completing developments. That law is designed to ensure land in Singapore, an island state with a population of more than 5 million, isn’t hoarded for speculation.
There is currently no discussion with Wheelock Properties Ltd. for a merger, SC Global said in a separate filing yesterday.
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.
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.