The Business Times | MARCH 28, 2013
CEO confident of reaching 50% stake
Even as United Engineers (UE) formally launched its $4.15-a-share, $713 million offer for WBL Corp, UE CEO Jackson Yap was in the midst of planning the company's next big move.
"Would you believe it? We are looking at other acquisitions ... We've stated we wanted to grow at a faster clip rather than tendering for the next job or buying land," he told The Business Times in an interview yesterday.
"For instance, on the hospitality side ... we want to grow from 800 rooms to 2,000 rooms. We can grow by buying one hotel, one hotel, one hotel, or we can go and buy somebody who has got 1,000 rooms, or somebody who's like us," he said.
UE, a property, engineering and construction group, has been looking for ways to expand beyond organic growth.
On the hospitality side, UE manages hotel and serviced suites under its "Park Avenue" brand.
It owns $1.2 billion of investment properties, including industrial, commercial and hotel assets. This does not include UE's latest purchase of 79 Anson Road last December, its first commercial property in the Central Business District, bought for $410 million.
A month after the Anson Road purchase, UE said it would make a competing bid for WBL over Straits Trading Company's $3.36-a-share offer. Straits Trading, which owns 43.6 per cent of WBL, was not drawn into a price war and let its offer lapse.
WBL is a technology, property and motor group. Its motor business includes distributing luxury cars such as Bentley, BMW and Bugatti. In China, it has a property development arm and a landbank.
Mr Yap noted that synergies and value can be found from WBL's China property business, especially from the relationships it built up there. UE can diversify geographically and grow at a faster pace, even as the Singapore market faces cooling measures, he said.
"In the long term, with rising urbanisation and a strong middle class, there is demand for residential, retail and commercial properties. Like Singapore, the demand is there and the government is trying to hold it down," he said.
UE's takeover bid for WBL faces a snag. WBL's largest shareholder, Straits Trading, has said there was "little reason" to sell. UE's concert party group for the takeover - OCBC, Great Eastern Holdings and OCBC's founding Lee family - already hold 39.54 per cent of WBL.
There is about 17 per cent of WBL's public float not affiliated to either Straits Trading or UE, comprising mostly retail investors and some funds. UE needs to convince 11 per cent to sell to take it past the 50 per cent controlling threshold.
Mr Yap said he was confident of reaching 50 per cent, saying UE's offer gives investors a chance to exit an illiquid counter. He said WBL might not see another takeover offer in the next 12 months if UE's offer fails, under takeover rules.
"If we were not to succeed, WBL's price might fall to the $3.20 to $3.30 level it was at before," he said.
"Investors could take out money in one counter and put it in some other thing which would grow faster," he added.
In its offer document yesterday, UE said WBL had not traded above $4.15 since February 2011.
UE also tried to talk down the valuation of $4.56 to $5.30 per WBL share that WBL's independent financial adviser, KPMG Corporate Finance, has put on it. It referred to recent cooling measures on car prices in Singapore, property restrictions in China and WBL's 74.3 per cent net profit drop for its fiscal first quarter ended Dec 31, 2012.
There is a "challenging operating environment" and UE will "leave it to (KPMG) to consider whether such developments will affect the valuation of WBL", UE said.
WBL investors have until April 24 to decide. KPMG is expected to come up with a report in the next two weeks.
WBL closed five cents lower at $4.25 yesterday, 2.4 per cent above UE's $4.15-a-share offer. UE shares closed at $3.19 yesterday, down two cents.
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