Eyes on Oxley as Yanlord raises UE cash offer

Singapore

YANLORD Land Group has raised its cash offer for United Engineers (UE) to S$2.70 per share, after scooping up 39.2 million shares or 6.15 per cent of UE in married trades done at the same price just before noon on Tuesday.

The Business Times understands that the sellers are likely to be multiple accounts aggregated by a broker. Oxley Holdings, the only other shareholder in UE with a sizeable block of shares, confirmed that it was not behind the sale.

The off-market deals lift Yanlord's total interest in UE to 41.42 per cent, and at S$2.70 per share, Yanlord's final offer comes in marginally higher than the S$2.60 per share it originally offered on Oct 25.

The offer is subject to one condition - that Yanlord gets enough acceptances for it to control no less than 50 per cent of UE by the close of the offer on Dec 11. Yanlord will not revise its price again, it said.

All eyes are now on Oxley and its top executives, who own a 24.48 per cent stake in UE and could turn the offer unconditional with a single vote.

Excluding those shares held directly by its chief and deputy chief executive, Oxley owns 18.92 per cent of UE, which it can cash out for S$325.6 million if it accepts the offer.

With Yanlord showing it the door, Oxley should exit UE, some analysts believe.

The revised offer price of US$2.70 per share is now closer to Oxley's cost price, said RHB analyst Jarick Seet: "The S$325.6 million can be put to better use, like lowering gearing, other investment projects, special dividends.

"If they (Oxley) were to stay on, it's hard to realise value for the UE shares and... it will likely be a value trap."

Smartkarma insight provider Arun George believes Yanlord's offer remains unattractive.

However, he said Oxley could use the opportunity to redeploy capital: "Oxley was exploring options to address ongoing investor concerns on the direction of its UE investment. Selling some of its stake to get Yanlord over the 50 per cent threshold may prove to be an acceptable compromise."

Oxley told BT it is evaluating its options.

UE shares rose 1.89 per cent to close at S$2.70 on Monday as trading resumed after a half-day halt.

The shares have traded range-bound between S$2.60 and S$2.68 since Oct 25, when Yanlord triggered a mandatory general offer by buying out its former consortium partners, Perennial Real Estate and Heng Yue Holdings. Yanlord paid S$2.60 per share to take over their holdings in UE.

No other investors accepted the S$2.60-per-share offer as the offer document had not yet been despatched, Yanlord said.

On Monday night, UE reported a third-quarter net profit of S$84.8 million, driven by net revaluation gains of S$65.2 million from its investment properties, with UE BizHub Tower on Anson Road accounting for the largest portion of the increase.

Excluding the revaluation gains, net profit would have been S$19.6 million, up 156 per cent from the same period a year earlier on higher takings from the completion of Phase 5A of the Chengdu Orchard Villa residential development in China.

At S$2.70 per share, Yanlord's revised offer amounts to 0.84 times UE's revalued net asset value per share of S$3.22 as at Sept 30.

Yanlord has previously said that it does not intend to privatise UE.

It didn't explain its rationale for raising its offer price on Tuesday, and declined to comment on how it found the 39.2 million block of shares, citing restrictions under the Takeover Code.

In July, UE took market watchers by surprise when it placed out all 21.7 million of its treasury shares - equivalent to a 3.41 per cent stake in the conglomerate - for S$2.58 apiece, which was the prevailing market price at the time.

Oxley chief Ching Chiat Kwong then questioned if UE had fetched the best price possible in the block sale and expressed dismay that Oxley had not been sounded out as a potential buyer.

UE later clarified that the treasury shares were sold to independent unrelated third parties that were independently sourced and selected by UOB Kay Hian.