[SINGAPORE] The independent directors of Millennium & Copthorne Hotels New Zealand (MCK) do not recommend shareholders of MCK to accept the increase of CDL Hotels Holdings New Zealand’s (CDLHH NZ) offer price to NZ$2.80 per ordinary share.
“While the independent directors welcome the increase in the offer, we believe it is still too low and inadequate,” Leslie Preston, chair of the independent directors committee of MCK, wrote in a letter to shareholders of the company on Monday (Apr 28).
The statement also noted that an independent adviser assessed a value range of NZ$4.40 to NZ$5 apiece, with a midpoint of NZ$4.70 per share – which continues to reflect a significant distance from the new offer price.
Other reasons mentioned for not accepting the increase in offer include how it undervalues recent capital expenditure on key hotels, and how it continues to be at a material discount to the market value of MCK’s net assets, significantly undervaluing the NZ$129.5 million (S$101.1 million) of recent acquisitions made by MCK.
The group on Apr 22 gave notice that it had increased the offer price to acquire all of the shares in MCK from NZ$2.25 to NZ$2.80 apiece. The offer closes on May 8.
CDLHH NZ, which is CDL’s wholly owned subsidiary, said that it will not raise the offer price further under the increased offer.
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After receiving overseas investment office consent, the NZ unit of CDL waived all of the remaining conditions of the new offer, including the 90 per cent minimum acceptance condition.
This means that the increased offer is now unconditional, and it will not make another takeover offer under the Takeovers Code for at least nine months from Apr 22.
Earlier on Jan 20, CDL said a decision was made with a view to delist and privatise MCK, at NZ$2.25 a share. MCK rejected the offer on Feb 10, on the basis that the price was not sufficiently reflective of the value of its hotel and property net assets.
MCK’s largest institutional shareholder, Accident Compensation Corporation (ACC) has stated it will not be accepting the new increased offer.
ACC is a large institutional fund with a long-term investment horizon, which holds approximately 4.5 per cent of the ordinary shares.
“Other holders of ordinary shares may not have the same investment horizon (too),” said Preston.
Preston also flagged a number of potential consequences which could affect minority shareholders if under the increased offer the threshold necessary to acquire the remaining shares is not met.
This mainly regards how liquidity for the shares of MCK would likely decrease on the New Zealand Exchange, its trading price may fall below the new offer price, and that there is no certainty that CDL’s unit will make another takeover offer.
“We encourage shareholders to consider these factors in light of their own circumstances as they decide whether or not to accept the increased offer,” said Preston.
Shares of CDL were trading at 1.2 per cent or S$0.06 lower at S$4.93 as at 4.20 pm on Monday.
