Wheelock Privatisation

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The Offer

If you’re a follower of financial news, you are probably already aware of the privatisation offer for Wheelock Properties Singapore (WPS) by its HK parent company Wheelock and Company (W&C). The offer values WPS at S$2.51bn and according to a Business Times article, W&C would have to fork out approx. S$600m for the minority interests.

(source: WPS website)

Is the Offer Fair?

WPS last closed at S$1.74 per share so that’s a 20% premium. You could say a 20% premium is decent and W&C’s financial advisor has diligently come up with many metrics to show how this offer is supposedly good for the MI. Nevertheless, the latest transacted prices have hit S$2.19 which is above the S$2.10 offer price, indicating that the market believes the offer price may be revised upwards. (or it could just be irrational and trend following folks :D. I’ll do another post about Seadrill, a US listed stock which traded so much higher than any reasonable post-bankruptcy valuation measure even after the bankruptcy plan was finalised and approved by the US Courts).

(image credit)

Back to Wheelock…

Personally, I think the MIs are morally right to hold out for a higher price considering the group NAV of WPS as at 31 Mar 2018 was S$2.68, which should be the floor value. In fact, the RNAV is probably substantially higher as there are asset values that are not reflected in the books. Not to mention WPS’ large cash holdings are a substantial part of its market cap, which creates a drag on earnings.




SGX seems to have this trend of undervalued companies being taken out at depressed valuations. While it is good that these actions act as catalysts to unlock value, being bought out at a low just because recent trading prices happen to be down is a risk to any value investor as low (when you invest) can always get lower (when privatised). At what point is a margin of safety safe enough??

To sell or to hold on?

Anyway, while I said the MI may be morally right in holding out, those who bought in after the privatisation announcement today hoping to get a better offer run the financial risk that there’s no increase in offer price and they lose money. Trying to scrape margins as a special situation investor can be risky and a recent Bloomberg article (link at the end) sheds some light on the recent fortunes of American merger arbitrage firms. Think Broadcom.




Having said that, I’ve done it before with the GLP exercise earlier this year and it netted me a tidy few thousands of low risk returns with some underutilised cash holdings, but one has to be selective. If you invested in WPS at a low, I guess you have time until the end of the offer period to decide. Do consult your own financial advisor. 🙂

Links to sources:
https://www.businesstimes.com.sg/companies-markets/wheelock-properties-parent-offers-s210-per-share-to-privatise-developer-stock-hits

https://www.bloomberg.com/view/articles/2018-07-11/merger-arbitrage-returns-are-suffering

Author: Mr.C

Mr.C – our resident investment expert and the muscle behind this entire movement for Sipping Coconuts. When his nose is not buried in anything financial, he’s either sailing or cooking or with the kids and always with a beer or a coconut nearby!

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