The Straits Times | MARCH 05, 2013
STC unlikely to sell WBL stake to UE despite allowing its offer to lapse
The withdrawal of The Straits Trading Company (STC) from the fight over WBL Corp does not mean rival bidder United Engineers (UE) will now have an easy ride to gaining control.
STC does not seem to want to sell its hefty 44.6 per cent stake in WBL to UE despite allowing its general offer for the conglomerate to lapse.
Market watchers said if UE cannot acquire this block of shares, it will be hard for it to get the 50 per cent control it needs for a successful general offer.
WBL shares dropped 25 cents or 5.7 per cent to $4.13 yesterday after STC withdrew from the bidding war. Singapore's takeover rules state that UE needs the market price to fall to the $4 per share of its proposed offer before it can buy from the open market.
If UE buys at a higher price it will have to raise its entire offer.
"At this level, it's hard (for UE) to gain majority control," said DMG & Partners analyst Goh Han Peng. "The share price is above $4 - if they want control they may need to raise their offer."
The ball was thrown into UE's court on Sunday when STC said it would not extend its offer for WBL Corp. It had failed to secure enough acceptances to lift its holdings above 50 per cent.
But STC remains WBL's largest shareholder with a 44.6 per cent stake.
Its position was cemented last November when it bought the WBL stakes held by fund companies Aberdeen Asset Management Asia and Third Avenue Management.
The deal to buy these shares then triggered a mandatory general offer from STC.
UE joined the fray in late January. It won the backing of OCBC Bank, Great Eastern Holdings and the Lee family, which founded OCBC. Together, these parties hold 38.3 per cent of WBL, so as a combined group they would be the firm's second-largest shareholder.
UE offered $4 for each WBL share, topping STC's effective $3.36 per share bid. STC's bid also had an option of new STC stock for each WBL share tendered.
STC looks unlikely to accept UE's offer. Executive chairman Chew Gek Khim told The Straits Times by e-mail yesterday that there is "little reason" to sell its stake in WBL.
"As the largest shareholder of the company, we intend to work closely with the board and other shareholders of WBL to unlock value in a way that will benefit all shareholders," she added.
UE would say only that it noted the lapse of STC's offer. Its statement added that its proposed offer is a strategic undertaking aimed at, among other things, its growth and expansion. UE said it will continue to pursue the transaction as planned, subject to shareholder approval.
The tussle has thrown the spotlight again on 107-year-old WBL, a venerable but often neglected conglomerate with businesses in the property, automotive and technology sectors.
Its Wearnes Automotive unit distributes Volvo, Renault, Jaguar, Land Rover and other car brands in six regional markets, including Singapore. WBL's property division in China has developed residential and commercial projects in many cities.
The market has been rife with talk of the various scenarios in this saga.\
One possibility would be for UE to convince enough small shareholders to sell so it can cross the 50 per cent mark, with STC also holding on to its stake.
In this case, the free float of WBL would drop below 10 per cent, which could lead to a stock suspension for the counter.
Singapore Exchange (SGX) listing rules require stakes belonging to the chief executive, directors, and substantial or controlling shareholders to be excluded from a company's free float of shares - the proportion available for ordinary investors to trade.
The more likely conclusion is that STC remains the largest shareholder, with the group backing the UE bid - including OCBC Bank and Great Eastern Holdings - in second place.
If this is the case, the parties will have to find a way to work with each other after being rivals in the bidding war.
One party may eventually sell out after some time. A good historical case study would be the tussle over steel company NatSteel.
Businessman Oei Hong Leong locked horns with hotelier Ong Beng Seng over the firm in 2003. Although Mr Oei lost the battle, he retained a 30 per cent stake, which he sold to Mr Ong in 2008.
For all the talk, UE has not actually launched its offer for WBL.
So market watchers will now turn their attention to Tuesday next week, when UE shareholders will decide whether to give the firm the go-ahead to formally table its bid.
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