Bugatti Dealer WBL Seen Sparking Bidding War: Real M&A

WBL Corp. is proving to be Asia’s most lucrative takeover bet for traders thanks to its luxury properties across China and its Bugatti and Bentley dealerships.

WBL, with real estate projects in five Chinese cities, last week received an offer from United Engineers Ltd. valuing the Singapore-based company at S$1.1 billion ($888 million), topping a proposal from fellow shareholder Straits Trading Co. WBL yesterday closed 16 percent higher than the most recent bid, indicating traders expect it to land the biggest price increase of any deal in the developed Asia-Pacific region, according to data compiled by Bloomberg.

United Engineers can afford to raise its offer 29 percent to secure WBL’s high-end Chinese real estate, said CIMB Group Holdings Bhd. WBL, which also controls Nasdaq-listed electronic component maker Multi-Fineline Electronix Inc., is so undervalued that its property and car-dealership units alone are worth more than the best takeover offer to date, according to Malayan Banking Bhd.

“This may just be a start of a possible bidding war,” Weiming Yang, whose clients trade stocks, commodities and indexes at brokerage IG Markets Ltd. in Singapore, said in a phone interview. “There’s increased interest in big, complicated conglomerates. The valuation should be higher.”

Model-T Fords

Anand Joseph, a spokesman for Straits Trading, a 126-year-old Singapore conglomerate that mines for tin and develops property, said it would be “inappropriate” to comment on the bidding process.

If United Engineers’ offer is successful, Chief Executive Officer Jackson Yap said he will work with WBL’s management and board to review its major businesses and assets, according to an e-mailed statement. He also said that part of the attraction of WBL is the outlook for property in China. United Engineers builds and develops properties in Singapore.

Mok Lai Siong, a spokeswoman for WBL, declined to comment on the potential for a price increase.

Wearne Brothers Ltd., as WBL was previously known, was founded in 1906 by Charles and Theodore Wearne and sold nailed-together Model T Fords in Singapore, introduced the Rolls-Royce to Malaysia and started the first commercial air service between the two countries in 1937, according to its website. After it was shut down during World War II, the company entered industries from double-decker bus services to computer design.

Chinese Revenue

WBL now generates almost half its revenue in China, where it develops residential and commercial property and sells Volvo cars, according to its 2012 annual report. The company also owns stakes in Multi-Fineline, and MFS Technology, which make circuits for phones and laptops, and businesses that distribute auto parts and provide engineering services.

Saying it sees “potential for continued growth” at WBL, Straits Trading offered on Nov. 26 to buy stakes from other shareholders at S$3.41 in cash or in exchange for 1.07 of its own shares to raise its ownership to more than 40 percent. Straits Trading then said it plans to buy the rest of the company at that price.

Last month, a United Engineers-led group, including WBL investor Oversea-Chinese Banking Corp., offered S$4 in cash for the 62 percent of WBL they don’t already own.

Bentley, Bugatti

United Engineers CEO Yap said WBL’s high-end residential and commercial buildings can tap China’s rising affluence, according to a Jan. 30 statement. The company also pointed to potential cost savings across the construction and engineering assets, and described the auto-dealership as a “potential engine of growth.”

WBL’s car dealerships represent 11 marques in Singapore, China, Hong Kong, Indonesia, Malaysia and Thailand. At home, WBL’s largest auto market by revenue, the company’s brands include Bentley, Bugatti and Jaguar.

Still, Chinese real-estate is the biggest draw to both bidders, said Alison Fok, a Singapore-based analyst at Maybank, as Malayan Banking is known. The property business may be worth as much as S$972 million, almost equivalent to United Engineers’ current bid, a sum-of-the-parts analysis by Fok shows.

“The key attraction is the properties in China,” she said in a phone interview. “These assets may be undervalued.”

WBL’s property assets stretch from Shanghai in the east to the central city of Chengdu, where the 895-unit Orchard Villa residential project is set to finish in 2016. Property revenue jumped 75 percent last fiscal year, company filings show.

Property Prices

New home prices in China rose for an eight consecutive month in January, recording the biggest gain in two years, SouFun Holdings Ltd., the country’s biggest real-estate website owner, said this month.

Still, China’s government has attempted to curb the domestic property market for more than two years, raising down-payment and mortgage requirements. It also imposed a property tax for the first time in Shanghai and Chongqing -- both sites of WBL developments -- and enacted home-purchase restrictions in about 40 cities.

Despite such measures, demand for high-end homes will continue, WBL said in its annual report.

WBL is worth between S$1.42 billion and S$1.57 billion, or S$5.04 to S$5.59 a share, depending on the value ascribed to the Chinese property, Fok wrote in a Jan. 31 report. The car dealership is valued at S$244 million, while the MFLX and MFS stakes should fetch a combined S$345 million.

“Within a group like WBL, there’s an awful lot of hidden value,” said Jonathan Foster, Singapore-based director of special situations at Religare Capital Markets. “It’s an old Singapore conglomerate, encompassing a number of businesses that evolved and were set up as part the original building of the country.”

Breakup Value

WBL closed at S$4.63 a share yesterday, 16 percent higher than United Engineers’ offer, giving the company a market capitalization of S$1.26 billion. That’s the most that any target is trading above its bid among deals valued at more than $100 million in the developed Asia-Pacific region, indicating traders expect WBL to fetch the largest increase to its takeover price, data compiled by Bloomberg show.

The shares were unchanged in Singapore trading today, while the benchmark Straits Times Index fell 0.8 percent.

United Engineers, which could offer as much as S$5.15 a share for WBL without overpaying, may choose to sell the technology business while keeping other divisions, said Lee Syn Yi, a Singapore-based analyst at CIMB. That would be 11 percent more than yesterday’s closing price and 29 percent higher than United Engineers’ current bid.

F&N Parallel

“The property would definitely be most relevant,” Lee said in a phone interview. “The engineering side might be relevant, too. My sense is that for the tech side, that could be monetized.”

The pursuit of WBL mirrors in part the takeover battle for Fraser & Neave Ltd., a fight that led to the biggest acquisition of a Singapore-based company. Thai billionaire Charoen Sirivadhanabhakdi won control of the 130-year-old property and beverage conglomerate with a S$13.8 billion bid.

With WBL, the buyers are backed by two Singapore families that have faced off before: the Lee family on United Engineers’ side, and the Tan family with Straits Trading.

They competed for control of Straits Trading in 2008, and locked horns when Straits Trading ousted WBL Chairman Ng Ser Miang at a shareholder meeting in January 2012, the Straits Times newspaper reported at the time.

A face-off between the two in this case could lead to WBL’s breakup as the two groups divide the company between them.

“There’s been a falling out between the key figures behind WBL -- United Engineers and Straits Trading,” Foster said. “There must be a lot of capacity for a partial breakup of WBL. There are lots of possibilities.”

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