PE firms Blackstone, KKR, RRJ and TPG have backed out of bidding for Global Logistics Properties (GLP) amid concerns that an insider bid by a consortium led by GLP CEO Ming Mei and including director Fang Fenglei and a fund associated with Alibaba’s Jack Ma may render the process pointless, the Financial Times reported on Friday. The report added that another potential bidder, PE firm Warburg Pincus is also learnt to be contemplating if it should pull out.
In response, the Singapore-listed warehouse operator issued a note on the bidding process, emphasising that it has undertaken measures to “alleviate potential conflicts of interest and ensure fairness of the process”.
“The reluctant bidders are concerned that an insider bid led by GLP’s chief executive Ming Mei with a consortium that includes Fang Fenglei, a director of GLP, and a fund associated with Alibaba’s Jack Ma, will make other submissions pointless,” the FT report said quoting sources.
A separate report by Reuters claimed that a Chinese consortium led by Fang’s private equity vehicle Hopu Investment Management, Hillhouse Capital Group and supported by GLP chief executive Mei is likely to submit bids for GLP next week. The report, which cited sources, added that the bids are non-binding.
These developments emerge at a time when the June 30 deadline for the bids is just a week away. The auction, which is estimated to be one of Asia’s most valuable private equity deals, is expected to raise $10.5 billion. The company’s enterprise value is estimated to be $19 billion.
Amid these reports, GLP shares crashed on Friday, diving almost 9.3 per cent at the time of opening. Trading in its shares had to be suspended later.
GLP’s statement tried to allay concerns, adding that the sale process is being overseen by a special committee comprising four independent directors, with assistance of J.P. Morgan (S.E.A.) as financial adviser and Allen & Gledhill LLP as legal adviser.
“All directors with a conflict or a potential conflict of interest have recused themselves from all decisions relating to the strategic review; and the company remains in discussion with shortlisted bidders,” it added.
The bidding process was kicked off on June 8 when GLP invited shortlisted bidders to submit their firm proposals. In its latest statement, the firm noted that it had not received any firm proposals so far.
The Financial Times pointed out that in 2014, Hopu had bought a 30.2 per cent stake in GLP’s China holding company for $2.1 billion, or one times the book value. At that time, GLP itself had valued that unit at 1.3 times book value. Moreover, the logistics firm had told investors at the time of its 2010 flotation that they should value China assets at two times the book value.
GLP CEO Mei had also bought 46.7 million shares in the China unit — worth about $51 million at the time — in a deal that was financed with a loan from Hopu.
Even as the situation unfolds, GLP’s biggest shareholder Singapore’s national wealth fund GIC is also facing questions over the role it could have played to avoid this situation and hold a more efficient auction.