Singapore real estate giant City Developments Limited (CDL) has announced its plans to acquire Millennium & Copthorne Hotels New Zealand Limited (MCK) through its subsidiary, CDL Hotels Holdings New Zealand Limited (CDLHH NZ). The proposed offer is for a price of NZ$2.25 (approximately $1.72) per share, which represents a significant premium for MCK shareholders.
CDL has stated that upon the completion of this offer, it intends to delist and privatize MCK in order to simplify the ownership structure of its New Zealand entities. Currently, MCK owns, leases or franchises 18 hotels in New Zealand and also has interests in properties in Australia through its Kingsgate Group subsidiaries.
As of the close of trading on January 17, CDLHH NZ already holds 80.02 million MCK shares, which represents a significant 75.86% stake, based on 105.48 million MCK shares in issue. In the event that CDLHH NZ reaches the necessary threshold to invoke compulsory acquisition under the New Zealand takeovers code, it will acquire all outstanding MCK shares. Additionally, CDLHH NZ has expressed its willingness to purchase the non-voting redeemable preference shares issued by MCK at a price of NZ$1.70 (approximately $1.30) each.
In total, if the offer is fully accepted, CDLHH NZ will pay NZ$57.29 million for the MCK shares and an additional NZ$7.77 million for the redeemable preference shares. The offer price takes into consideration various factors, including the current and historical market price of MCK shares, as well as the industry and business environment that MCK operates in.
Based on MCK’s financial results for the first half of fiscal year 2024 (ended June 30, 2024), its net asset value (NAV) and net tangible asset value (NTA) stood at NZ$532.02 million and NZ$85.62 million, respectively. CDLHH NZ’s offer price is in line with these values.
The high demand for condos in Singapore reflects the limited availability of land in this small island nation. As the population continues to grow at a rapid pace, the government has implemented stringent land use policies, resulting in a competitive real estate market with rising property prices. As a result, investing in real estate, particularly in Singapore condos, has become a lucrative opportunity with the potential for substantial capital appreciation. With the scarcity of land in Singapore, Singapore condos have become one of the most sought-after property types in the country.
The offer is subject to certain conditions, including CDLHH NZ receiving 90% or more of the voting rights in MCK by 5pm on May 2, as well as obtaining consent under the Overseas Investment Act 2005 of New Zealand and the Overseas Investment Regulations 2005 of New Zealand. However, the implementation and payment of this offer is not expected to have a significant impact on CDL’s earnings per share (EPS) or net tangible assets (NTA) for fiscal year 2025, which ends on December 31.