Deals

Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

If he were alive today, the rubber and pineapple king of 1930s Singapore would surely be asking whether the custodians of his empire just sold another chunk of it too cheaply.

That's the unavoidable conclusion from the drama surrounding the takeover of United Engineers Ltd., where a general offer is flirting with failure after the emergence of a rival buyer willing to pay more than the price accepted by Oversea-Chinese Banking Corp.

Too Low
A Yanlord-led consortium agreed to pay S$2.60 a share for OCBC's stake in United Engineers. The market value is higher
Source: Bloomberg

United Engineers, a property and construction engineering company, dates its origins to 1865 and was bought from its British owners by Lee Kong Chian, the plantations wizard who founded OCBC.

It wouldn't be the first time that the Singapore bank has faced accusations of offloading pieces of Lee's legacy for less than their value.

In 2012, OCBC and a subsidiary sold its stake in Fraser & Neave Ltd., setting off an intense battle for the beverage maker between Thailand's richest man, Charoen Sirivadhanabhakdi, and Indonesian billionaire Mochtar Riady. The $11 billion saga ended with victory for Charoen. (His purchase also spurred Heineken NV into an expensive buyout of Asia Pacific Breweries Ltd., its joint venture with F&N and the maker of Tiger beer.)

OCBC shortly thereafter tried to shop its shareholding in United Engineers to Charoen. When that didn't lead to a deal, the bank and its affiliates reached out to Riady, but a transaction remained elusive.

Two months ago, it was third time lucky. An investor consortium led by Chinese builder Yanlord Land Group Ltd. agreed to buy 33.4 percent of United Engineers from OCBC and its insurance unit at S$2.60 ($1.93) apiece, a discount to the previous 12 months' average price of about S$2.65.

That it was a lowball bid became evident during the public offer triggered by the change of control. On Monday, Yanlord and co-acquirer Perennial Real Estate Holdings Ltd. had to stretch the deadline by a week, a second extension of the tender.

According to Bloomberg reporter Abhishek Vishnoi, odds have risen that the cash deal may lapse. That's because Yanlord and associates must cross the 50 percent threshold for their offer to become unconditional. As of Monday, they had managed to gather only 34.79 percent. Should they fail to get the remaining 15.2 percent, the public offer would be scrapped.

The fly in Yanlord's ointment is Oxley Holdings Ltd., a Singaporean builder that specializes in niche, upscale projects. Oxley and its policeman-turned-tycoon chairman, Ching Chiat Kwong, have managed to acquire 14.86 percent of United Engineers by buying at prices above S$2.60. Clearly, they think there's more value in United Engineers than is reflected by the offer on the table.

Bottoming Out
After15 straight quarters of decline, Singapore home prices appear to be stabilizing
Source: Urban Redevelopment Authority

Should that assessment turn out to be true, OCBC management can expect a repeat of its 2013 annual general meeting where shareholders grilled it for selling F&N and Asia Pacific Breweries shares at S$8.88 and S$45 apiece, when eventually Charoen and Heineken paid S$9.55 and S$53.

Back then, the bids were unsolicited and at a premium to market prices.

"What's the excuse this time?" Singapore's rubber baron might have asked.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Andy Mukherjee in Hong Kong at amukherjee@bloomberg.net

To contact the editor responsible for this story:
Matthew Brooker at mbrooker1@bloomberg.net