In a recent filing on January 20, City Developments Limited (CDL) announced that its subsidiary, CDL Hotels Holdings New Zealand Limited (CDLHH NZ), is offering $2.25 ($1.72) per share to acquire all the remaining shares of New Zealand-listed Millennium & Copthorne Hotels New Zealand Limited (MCK). Once the offer is completed, CDL plans to delist and privatize MCK, simplifying the ownership structure of its New Zealand entities.
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At present, MCK owns, leases, or has under franchise a total of 18 hotels in New Zealand. It also has a majority stake in CDL Investments New Zealand Limited and holds interests in properties in Australia through its subsidiaries in the Kingsgate Group.
As of January 17, CDLHH NZ holds 80.02 million MCK shares, representing a 75.86% stake out of the total 105.48 million shares in issue. If CDLHH NZ exceeds the threshold required to trigger the compulsory acquisition provisions of the New Zealand takeover code, it will compulsorily acquire all of the outstanding shares in MCK. Additionally, CDLHH NZ also has the option to redeem the non-voting redeemable preference shares issued by MCK.
Since the offer does not include the MCK non-voting redeemable preference shares, CDLHH NZ has expressed its willingness to acquire these shares at $1.70 or approximately $1.30 per share through its broker, Craigs Investment Partners, by buying them on the Main Board of the New Zealand Stock Exchange (NZX). As of January 17, CDLHH NZ already holds 91.34% or 48.17 million of MCK’s non-voting redeemable preference shares.
If the offer is fully accepted by MCK’s shareholders, CDLHH NZ will pay a total consideration of $57.29 million. Additionally, CDLHH NZ is also expected to pay around $7.77 million to acquire all of the redeemable preference shares it is seeking.
The offer price for MCK’s shares and redeemable preference shares takes into account the current and historical market prices, as well as the operating environment of the company. As of June 30, 2024, MCK had a net asset value (NAV) of $532.02 million and a net tangible asset value (NTA) of the same amount. The NAV and NTA attributable to the MCK shares subject to the offer are estimated to be $85.62 million each as of June 30, 2024.
The offer is contingent on CDLHH NZ receiving 90% or more of the voting rights in MCK by May 2, 5pm. It is also conditional on CDLHH NZ obtaining consent under the Overseas Investment Act 2005 of New Zealand and the Overseas Investment Regulations 2005 of New Zealand to own and control all of MCK’s shares.
The implementation and payment of the offer are not expected to have a significant impact on CDL’s earnings per share (EPS) or net tangible assets (NTA) for the fiscal year ending December 31, 2025.