City Developments to buy out Millennium & Copthorne Hotels for $3.86b

M&C shareholders will be entitled to receive $11.88 for each M&C share.

City Developments (CDL), along with its indirect wholly owned subsidiary Agapier Investments Limited (Bidco), has offered to buy out shareholders of London-traded hotel chain Millennium & Copthorne Hotels (M&C) in a deal that would value M&C at $3.86b (GBP2.23b), an announcement revealed.

Currently, CDL owns approximately 65.2% of M&C, and M&C shareholders will be entitled to receive a cash amount of $11.88 (GBP6.85) for each M&C share, which represents a premium of approximately 37% to M&C’s closing price.

“It is also an increase of $1.13 (GBP0.65) from the previously recommended final cash offer of $10.76 (GBP6.20) per M&C share, which included a special dividend of $0.35 (GBP0.20) per share) made to M&C shareholders on 21 December 2017,” CDL said. The previous offer lapsed on 26 January 2018 because CDL did not satisfy the minimum acceptance condition of more than 50% of M&C’s shares that it did not already own.

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CDL noted that it has also received irrevocable undertakings to accept the final offer from JNE Partners, MSD Capital, International Value Advisers, Classic Fund Management AG and BWM AG. These key minority shareholders hold a total of 49,268,604 M&C shares representing approximately 43.6% of the M&C shares not already owned by CDL.

The maximum cash consideration payable by CDL amounts to $1.34b (GBP776.29m), which will be funded through a combination of internal cash resources as well as funds made available to CDL under a credit facility.

That said, as M&C owns land in New Zealand, the final offer is still subject to a New Zealand Overseas Investment Office (OIO) pre-condition for the indirect acquisition of interests in sensitive land, and significant business assets in New Zealand that would occur if the final offer takes place and is successful.

Barclays Bank PLC and Merrill Lynch (Singapore) are acting as the joint financial advisers, and Linklaters is acting as legal adviser to CDL.

According to Sherman Kwek, CDL’s Group CEO, taking M&C private is in line with CDL’s focus on boosting recurring income and enhancing underperforming assets amidst a highly competitive landscape.

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“The offer enables shareholders to exit an illiquid stock at a significant premium. We believe that a privatised M&C will be in the best position to navigate the increasingly challenging and competitive global hospitality landscape with agility and nimbleness,” he explained.

Upon completion of the final offer, CDL said it intends to work with M&C’s management team and employees to meet the operational challenges faced by M&C and to identify opportunities to improve the operating and financing efficiency of its hotels.

CDL underlined that it intends that M&C will continue to own, lease, manage, franchise, invest in and/or operate hotel assets across a wide geographical landscape. “CDL will continue to evaluate opportunities and may make changes to individual hotels within M&C’s portfolio to meet the challenges facing its business,” the firm said. 

Photo from Yahoo! Finance Singapore.