INVESTMENT research company Morningstar has recommended that unitholders of Suntec Real Estate Investment Trust (Reit) reject the revised S$1.19 apiece cash offer from property tycoon Gordon Tang and his wife Celine.
The offer was made through their investment holding company Aelios, which was formed to undertake the offer and acquire the Reit’s units.
In a note on Thursday (Jan 9), Morningstar equity analyst Xavier Lee said that while the revised offer is a 2.6 per cent improvement from the initial one of S$1.16 apiece made on Dec 5 last year, it still falls below the research company’s fair-value estimate of S$1.38 a unit, and “does not reflect the Reit’s intrinsic value”.
He believes the offer price was revised to comply with the Singapore Code on Take-overs and Mergers, which requires the offeror to match or exceed the price paid in the open market for the shares it acquires during the offer period, and in the six months immediately preceding the date of the offer announcement, “to ensure fair treatment of all shareholders”.
When Aelios revised its offer on Wednesday, it had on the same day acquired about 18 million units at S$1.19 a unit by way of an open-market purchase.
Given that Suntec Reit’s unit price had rallied above S$1.19 at the open on Thursday, Lee believes that investors can get more value by selling their shares on the open market than by taking up the revised offer.
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He said: “We still do not believe that Aelios intends to take the Reit private with this offer.”
Aelios was initially deemed to have a 29.3 per cent stake in the investment trust. Its deemed interest reached 31.5 per cent after it acquired 62.5 million units on Dec 5 by way of on-market transactions at S$1.16 apiece.
This triggered an offer by the investment holding company, which said that the offer was made solely to comply with Rule 14.1 of the Take-over Code, by which any entity controlling more than 30 per cent of a Reit must make a mandatory general offer to acquire its remaining units.
RHB had previously recommended that unitholders of Suntec Reit reject the offer of S$1.16 a unit in cash. It said that the offer “severely undervalued the Reit” as it reflected a 44 per cent discount to its net asset value (per unit) of S$2.07.
As at 6 pm on Wednesday, the offeror and its concert parties owned, controlled or agreed to acquire a total of about 973.4 million units, representing about a third of the total number of Suntec Reit’s issued units.
The offer will turn unconditional once Aelios receives at least half of Suntec Reit’s total units. It intends to maintain the listing status of the Reit on the Singapore Exchange, following the completion of the offer.
The closing date for the offer has been extended to 5.30 pm on Feb 3.
Units of Suntec Reit were up S$0.01 or 0.8 per cent at S$1.22 as at 10.36 am on Friday.
