Singapore’s Frasers Property and the manager of its SGX-listed, wholly-owned subsidiary Frasers Hospitality Trust (FHT) are looking to privatise the latter through a trust scheme of arrangement, according to an announcement on Monday.
The offeror is proposing to acquire all of FHT’s issued stapled securities except for those held by TCC Group Investments, Frasers Property as well as its subsidiaries, at a scheme consideration of S$0.70 apiece in cash.
Frasers Property is backed by the Thai billionaire Charoen Sirivadhanabhakdi’s TCC Group, which holds a majority stake in both Frasers Property and FHT.
The Thai conglomerate had taken over Frasers & Neave (F&N) – then a beverage, property, and publishing business valued at $13.7 billion – in 2013. It subsequently listed F&N’s property arm Frasers Property (then called Frasers Centrepoint) on the SGX in 2014.
The offered price of the stapled securities in the latest take-private arrangement represents a premium of 43.8% over its 12-month, volume-weighted average price (VWAP) as on April 7.
It also represents a premium to the last announced net value of around $0.65 and is around 16.7% over recent analyst consensus of the counter’s target price in 2022.
This implies a price to net asset value multiple of 1.07 times, which is above the historical averages of FHT’s trading multiples since its listing at S$0.88 per stapled security in 2014 as well as the current trading multiples of other hospitality trusts listed on SGX and the privatisations of other real estate investment trusts (REITs).
According to its website, FHT’s 14 properties span across Asia, Australia, and Europe, valuing its portfolio at some S$2 billion, up 35% since its initial public offering (IPO) in 2014.
The stock jumped 42% this year following declines in the previous two years, bringing its current market value to S$1.3 billion ($930 million).
The move to privatise FHT comes amid challenges in growing the hospitality REIT’s distribution per stapled security and net asset value.
While FHT’s portfolio valuation grew by 35% since IPO, it has not managed to translate this growth into distribution per stapled security (DPS) and NAV growth due to “the muted performance of the hospitality sector in the markets FHT operates in, and the strengthening of the Singapore dollar against FHT’s operational currencies,” FHT’s manager says.
Further challenges come from the uncertainty over managing COVID-19, geopolitical tensions, looming recessionary pressures as well as FHT’s small size compared with peers, Frasers Property and FHT’s manager pointed out.
To this end, FHT’s independent directors noted that the scheme is the best option given that it represents a credible offer from a financial perspective, offers strong deal certainty for stapled security holders in terms of timing and execution, and allows stapled security holders to realise their investment at an attractive valuation immediately.
The move comes after the managers of FHT announced on Apr 8, that it was undergoing a strategic review to enhance and unlock value for its stapled security holders. Options it had explored include continuing FHT’s existing strategy, expanding FHT’s existing platform via acquisitions or mergers, strategic sale of all or select assets, and the sale of the FHT platform to a third party or the sponsor.
The proposed privatisation “is the best option and represents a credible opportunity for our stapled security holders to realise their investments at an attractive valuation,” FHT’s Chief Executive Officer Eu Chin Fen said in the statement.
BofA Securities, DBS Group Holdings, and Oversea-Chinese Banking Corp are advising on the deal. The scheme will require the necessary regulatory and court approvals and is subject to approval by stapled security holders.
Shares in Frasers Property closed flat at S$1.10 while FHT’s stapled securities closed flat at S$0.66, on June 8, before their trading halt.