CapitaLand To Buy All Of Ascott

Source : TODAY, Tuesday, January 8, 2008

It offers 43% premium for remaining unowned shares

CapitaLand, South-east Asia’s largest property firm by market value, is offering to buy the shares it doesn’t already own in its unit, The Ascott Group, in a deal that values the luxury serviced residences operator at $2.8 billion.

CapitaLand, through its subsidiary Somerset Capital, is making the unconditional cash offer of $1.73 per Ascott share, which is a premium of 43 per cent to the last traded price of $1.21 on Friday and 41.8 per cent to the one-month weighted average price of the shares. CapitaLand, which already owns 66.5 per cent of Ascott, will fund the buyout of the remaining shares through internal resources and bank loans specifically taken for the purpose.

Trading in the shares of CapitaLand, the Ascott Group and Ascott Residence Trust was halted yesterday ahead of the announcement early this morning.

Ascott, the biggest operator of serviced apartments in Asia and Europe, is turning to emerging markets in the two regions for its next stage of growth.

The company, which has over 20,200 serviced residence units in Asia, Europe and the Persian Gulf region under its Ascott, Somerset and Citadines brands, aims to boost revenue by expanding the number of units to 25,000 by 2010.

CapitaLand’s offer comes at a time when competition in the global serviced apartment market is intensifying. Ascott recorded a turnover of $318.8 million in the year to Sept 30, 2007 - a 5-per-cent improvement from the year-earlier period. While net profit from operating assets grew 21 per cent to $40.2 million, overall net profit fell 12 per cent to $131.9 million because of lower portfolio gains and expenses incurred for project development.

CapitaLand said that by taking Ascott private, it will allow the serviced residences operator to have the full flexibility of leveraging on the parent company’s capital base as well as its project development opportunities, without being unduly encumbered by compliance requirements expected of a listed entity.

Apart from strengthening Ascott’s leadership position in the market, privatising Ascott will also maximise CapitaLand’s competitive advantage and increase cost savings, CapitaLand said in its statement.

“Privatising Ascott will also enable CapitaLand to deploy capital and human resources seamlessly within the CapitaLand group. This is to better enable CapitaLand and its various strategic business units to combine their resources and expertise to exploit the business opportunities in the global real estate landscape,” chief executive Liew Mun Leong said.