Mandatory conditional cash offer of S$1.16/unit for Suntec REIT
On 5 December 2024, Aelios Pte Ltd, a company 50% owned by Gordon Tang and 50% owned by his spouse Celine Tang, has made an offer of S$1.16/unit in cash for shares in Suntec REIT which they and the parties acting in concert with them do not already own.
The offer is conditional upon them receiving a minimum acceptance of the offer, such that they hold more than 50% of the total voting rights in Suntec REIT.
The offeror, however, reserves the right to revise the terms of the offer. In addition, the offeror intends to maintain the listing status of Suntec REIT.
Steady increase in stake in Suntec REIT; offer made to comply with the code
Over the years, the Tang family has been steadily increasing their stake in Suntec REIT, with the pace of acquisitions picking up in 2024.
On 5 December 2024, the offeror concert party group (Tang family and its vehicles) acquired 62,541,700 units in Suntec REIT in the market at S$1.16/unit, which brought their combined unitholding in Suntec REIT from 29.31% to 31.45%.
As a result, under the Singapore Code on Take-overs and Mergers, the offeror is obliged to make an offer for all the units it does not already own.
Offer document and Independent Financial Adviser to be appointed.
An offer document will be sent electronically to all unitholders between 14-21 days from 5 December 2024.
The board will also appoint an Independent Financial Adviser (IFA) to advise Independent Directors of Suntec REIT.
Subsequently, a circular containing the advice of the IFA and the recommendation of the Independent Directors will be issued to unitholders within 14 days from the date the offer document is sent.
Offer price at a 44% discount to NAV
Based on the cash offer price of S$1.16/unit against the net asset value (NAV) per share of Suntec REIT as of 30 September 2024, the offer is made at a 44% discount to NAV or at a P/B of 0.56x.
The offer is also broadly in line with the average share price of Suntec REIT in the last one month of ~S$1.15/unit.
In our view, the deep discount to book value that Suntec REIT trades at today is partially due to the high 42.3% gearing of the REIT.
However, we noted earlier that Suntec REIT may benefit from the new single leverage limit of 50% announced by the MAS.
ESR Group is a key shareholder of Suntec REIT
We will also be looking out for whether Suntec REIT’s substantial shareholder, ESR Group, which owns ~10% in Suntec REIT is likely to accept the offer.
Earlier in May 2024, ESR divested its ~19% unitholding in ARA US Hospitality Trust and the manager to Acrophyte Limited Pte Ltd, owned by Gordon Tang and Celine Tang, as the Trust was deemed non-core.
The offer for Suntec REIT comes a day after ESR Group itself received a privatisation offer by a consortium led by Starwood Capital Group, Sixth Street and SSW Partners.
While Suntec REIT was previously deemed as a core holding of ESR Group, this may change with the privatisation offer it has received.
What would Beansprout do?
Suntec REIT’s share price bounced by 5% to close at S$1.23 on 6th December, following the announcement of the offer.
This likely reflects investors’ view that the offer of S$1.16 may not reflect the underlying value of Suntec REIT.
As the offer price is at a deep discount to the book value of Suntec REIT as well as below the current price of Suntec REIT, we will not be inclined to accept the offer.
The offer price is also below the consensus share price target of S$1.33 as of 6 December 2024.
We will be looking out for corporate developments at ESR Group and whether it is likely to accept the offer.
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