The Offer is for the remaining ordinary shares of CMA that CapitaLand does not already own and is conditional on receiving acceptances such that CapitaLand holds more than 90.0% of CMA.
SOURCE: http://news.capitaland.com Press Release
CapitaLand currently holds approximately 65.3% of CMA. The Offer price is S$2.22 in cash for each CMA share. It represents a premium of 27.0% to the one-month volume-weighted average price (VWAP), and a premium of 20.7% to the net asset value per share of CMA and its subsidiaries (CMA Group) as at 31 December 2013. The Offer price will be reduced for any CMA dividend or distribution on or after the announcement date, including the currently proposed CMA final dividend of S$0.0175 per share for FY2013.
The Offer will be funded through a combination of internal cash resources and borrowings of CapitaLand and its subsidiaries (CapitaLand Group), excluding those of CMA Group.
Rationale for Offer
The intention of the Offer is to delist CMA and fully integrate it into the CapitaLand Group. The Offer allows CapitaLand to achieve the following key objectives: Fully integrating CMA significantly enhances CapitaLand’s competitive strengths in integrated developments
The ‘One CapitaLand’ strategy seeks to harness the key strengths of its various business units to create differentiated real estate projects and enhance overall project returns. The development of integrated projects is core to CapitaLand Group’s business strategy, as evidenced by its many highly successful integrated projects such as its Raffles City projects in Singapore and China. The individual components of an integrated development complement one another to increase the overall attractiveness of the project. For example, the pre-sales of residential units help fund development costs and improve project cash flows whilst mall connectivity enhances the appeal to commercial tenants and2 serviced residence customers. Malls in integrated developments are likely to enjoy higher foot traffic and a captive catchment from integrated offices and serviced residences. CapitaLand’s integrated developments are typically situated within close proximity to a major transportation hub, providing incremental foot traffic.
Delisting CMA enables greater alignment between CapitaLand and CMA’s business strategies by focusing resources on highest overall project returns. This strategy is expected to confer benefits including improving sourcing of opportunities, streamlining of operations and greater resource accessibility and mobility across strategic business units. CapitaLand will continue to grow its shopping mall business.
Simplify CapitaLand Group’s organisational structure
The Offer reinforces CapitaLand’s strategy to streamline the CapitaLand Group’s organisational structure as the delisting of CMA removes one “listed developer” layer. CapitaLand Group will benefit from a clearer structure – with a single listed developer integrated across all asset classes, and five key listed real estate investment trusts, (REITs), for capital recycling. This provides investors with a clear investment proposition as the CapitaLand Group will have a good balance between recurring income from REITs and investment properties, and development income from its development activities. Reduced organisational complexity would also provide sharper focus for CapitaLand Group’s operations and enhance competitiveness.
Increase CapitaLand’s financial flexibility and scale
By delisting CMA, CapitaLand will have more flexibility to access and allocate capital across all of its strategic business units, enabling the CapitaLand Group to direct its resources across asset classes in a manner that best enhances shareholder returns. This is a significant competitive advantage for CapitaLand, given the large capital outlays required for integrated developments.
Increasing CapitaLand’s ownership of CMA also expands CapitaLand Group’s scale. Its total assets increase by 13.4% on the basis of its effective share in its subsidiaries’ assets as at 31 December 2013 on a pro forma basis. Furthermore, Singapore and China will continue to remain as CapitaLand Group’s core markets, constituting more than 80% of its effective share of total assets2 on a pro forma basis. The combination of increased financial flexibility and scale allows CapitaLand Group to better pursue business opportunities in its core markets.
Unlock shareholder value and achieve synergies
The transaction is expected to be immediately accretive for CapitaLand shareholders. Based on the Offer terms, a full privatisation of CMA would raise the earnings per share of greater than those for FY2013.3 CapitaLand Group for FY2013 by approximately 21.5% and improve the return on equity of CapitaLand Group as at 31 December 2013 from 5.4% to approximately 6.7% on a pro forma basis.
As a listed entity, CMA has to incur listing, compliance and other related costs. If delisted, these costs would be saved and additional cost efficiencies would result from greater flexibility of mobilising services and resources among CapitaLand Group’s other unlisted strategic business units. Post-integration, CMA will have the flexibility to leverage on the capital base of CapitaLand Group to optimise its funding costs and capitalise on growth opportunities.
Mr Ng Kee Choe, Chairman of CapitaLand Group, said: “The delisting and full integration of CMA will significantly enhance CapitaLand’s position to harness its competitive strengths across business units and enable it to deepen and strengthen its leading position in integrated developments. CapitaLand continues to be committed to its vision to be a pre-eminent real estate company in Asia.”
Mr Lim Ming Yan, President & Group CEO of CapitaLand Limited, said: “The proposed delisting of CMA is in line with our ‘One CapitaLand’ strategy. Post transaction, there will be six listed entities in the CapitaLand Group, compared to eight in January 2013. More importantly, development activities will be undertaken by CapitaLand, while most of our stabilised assets will be held in the listed REITs. This will significantly simplify CapitaLand Group’s structure and enhance our ability to undertake and optimise integrated developments. CapitaLand will be in a better position to capitalise on the growing trend towards integrated developments in our core markets of Singapore and China.” He added: “The transaction unlocks shareholder value for CapitaLand shareholders as it is expected to be immediately accretive. There will also be revenue and costs synergies achieved through the delisting of CMA, which comes from reduced listing costs and flexibility to mobilise services and resources within the CapitaLand Group.” Credit Suisse and Morgan Stanley are the joint financial advisers to CapitaLand.