SINGAPORE (July 14): Lim & Tan says it does not expect United Engineers to be taken private successfully in the latest offer.
See: Yanlord-led consortium to acquire stakes in UE, WBL Corp for up to $730 mil
In its Friday daily review, the brokerage says the offer price for both UE and WBL Corporation at $2.60 and $2.07, price them at 0.88x and 0.78x price to book and "is clearly disappointing for minority shareholders of UE".
This is especially so given that most of the property related transactions in the past have been at a minimum of 1x book. And while Yanlord Land Group and Perennial Real Estate Holdings will definitely try to extract value, this will understandably require some time.
"Given that there will unlikely to be any more speculative appeal in UEL, we are thus lowering our recommendation from “buy” to “hold” and removing the stock from our portfolio recommendation," says Lim & Tan.
UE has key business activities in property rental and hospitality, property development, and engineering, distribution and manufacturing. UE owns 67.6% of WBL, a private property firm.
Yanlord, together with Perennial and two of its sponsors, Kuok Khoon Hong and Wilmar International, as well as a private investor, have through their respective nominees or subsidiaries established a special purpose vehicle, Yanlord Perennial Investment (Singapore) to acquire an aggregate 33.5% stake in UE at $2.60 per share from Oversea-Chinese Banking Corporation and Great Eastern Holdings and OCBC’s Lee Family, triggering mandatory offers for the remaining ordinary shares and preference shares in UE at the same price.
Concurrently, the consortium has acquired a 10.0% stake in WBL at $2.07 per share and may, subject to certain conditions, subsequently acquire another 19.9% stake at the same price.
Shares in UE are down 5 cents at $2.66.
