SINGAPORE CapitaLand Ltd (CATL.SI), Southeast Asia's biggest property developer, said it has offered S$3.06 billion ($2.45 billion) to buy out minority shareholders in its 65-percent owned CapitaMalls Asia Ltd CMAL.SI business.
In a deal that would simplify its corporate structure and taking advantage of a discount valuation at the unit, CapitaLand said on Monday it's offering S$2.22 per share in CapitaMalls, a shopping malls operator. That represents a 23 percent premium to last Friday's CapitaMalls closing share price of S$1.80.
Trading in both CapitaMalls and CapitaLand, 39-percent-owned by Singapore sovereign investor Temasek Holdings TEM.UL, was halted from the start of trading on Monday pending an announcement.
"It's a function of a change in strategy" at CapitaLand, said Donald Chua, head of Asia ex-Japan property research at CIMB. "The new CEO has been trying to restructure the company and he wants to increase ROE (return on equity) and IRR (internal rate of return)," he said.
CapitaMalls stock has been trading at a discount to revised net asset value in the last few years, Chua said. Shares in CapitaMalls have traded below its IPO price of S$2.12 for most of the period since it was listed in late 2009.
After being named chief executive in January 2013, Lim Ming Yan has taken steps to focus on CapitaLand's core businesses in China and Singapore, while the company has shed stakes in non-core markets. In March, CapitaLand sold its remaining 39.1 percent stake in Australia's Australand Property Group ALZ.AX for around $849 million.
There has been a spate of acquisitions in Singapore's real estate sector over the past two years, where business tycoons are taking advantage of depressed prices to take listed property firms private.
Firms linked to Singapore's fourth-richest man, Wee Cho Yaw, are involved in two such takeovers, following a move by the chairman of luxury developer SC Global Developments Ltd, Simon Cheong, to take his firm private in late 2012.
The CapitaMalls offer comes as Singapore's property market enters a slowdown following a number of measures by the government to cool the market by imposing lending curbs and taxing foreign buyers. The market is still up about 59 percent since 2009, fuelled by rock-bottom lending rates and foreign buyers.
CapitaLand said the acquisition would simplify the group's organizational structure and boost shareholder returns.
"CapitaLand Group will benefit from a clearer structure - with a single listed developer integrated across all asset classes," CapitaLand said in a statement to the Singapore exchange on Monday.
CapitaMalls, which manages 105 shopping malls, earned 43 percent of its revenue from China last year, 32 percent from Singapore, and most of the rest from Japan and Malaysia.
Morgan Stanley (MS.N) and Credit Suisse CSGN.VX are advising CapitaLand on the transaction.
(Reporting by Anshuman Daga and Saeed Azhar; Additional reporting by Eveline Danubrata; Editing by Kenneth Maxwell)