LONDON (Reuters) - Board directors at Millennium & Copthorne Hotels (M&C) PLC (MLC.L) defended their decision to back a takeover offer valuing the firm at 1.8 billion-pounds ($2.4 billion) from the London-listed company’s majority shareholder, after other investors criticized the deal.
The independent non-executive directors of the FTSE 250 hotelier said on Thursday that they had “taken into account both the potential growth and the risks inherent in the continued execution of M&C’s strategy, as well as the underlying assets of M&C” when deciding to back the bid from City Developments Limited (CDL).
They also said they had rejected two previous proposals from CDL – the first pitched at 510 pence a share – before the Singaporean group offered 552.5 pence in cash, which was announced to the stock market on Oct. 9.
The statement comes after minority shareholders in M&C, including Fidelity International, criticized the bid from CDL, which is part of billionaire Kwek Leng Beng’s Hong Leong Group, as being too low, arguing it does not account for the value of the hotelier’s property assets. M&C has 137 hotels in 27 countries, including sites in London and New York.
The independent directors, in a joint statement with CDL, said that historically the stock market has not tended to focus on M&C’s underlying property assets when valuing the company.
“Whilst an assessment of the underlying assets of M&C is a relevant reference point, it is important to note that M&C has traded, and continues to be valued by the market, primarily on an earnings basis,” the independent directors said. “It is not M&C’s strategy to realize value through the sale or repurpose of its assets.”
CDL has previously said that it does not intend to sell off any of M&C’s London or New York hotels if the takeover is successful and that it plans to continue running the company as a hotel owner and operator.
The directors confirmed on Thursday that this constituted a so-called post-offer intention statement under Britain’s Takeover Code.
While such statements are not binding, the Code stipulates that such statements must be accurate and made on reasonable grounds.
CDL already owns 65.2 percent of M&C and its bid comes at a 21.4 percent premium to the hotelier’s share price before the takeover proposal was made public.
The offer would see the Singaporean group acquire the 34.8 percent of M&C that it does not already own for 624.3 million pounds and values the hotelier in its entirety at about 1.8 billion pounds.
Reporting by Ben Martin; Editing by Elaine Hardcastle