Indonesian group can either sell its shares, keep them or submit a counterproposal
LIPPO Group, the No. 1 shareholder of Robinson & Co, seems to be caught between the devil and the deep blue sea in the face of a surprise offer from Dubai- based Al Futtaim.
Lippo president and Robinson deputy chairman Stephen Riady told The Straits Times the offer was unexpected. Lippo is evaluating the offer and its options, he said.In 2006, Lippo created a stir at Robinson and its loyal customer base with a bold $203 million purchase of a 29.9 per cent stake in the 150-year-old retailer.
The old guard at Robinson's board was squeezed out, as the Indonesian group sought to make its mark. Now, the boot might be on the other foot.
Mr Riady did not spell out Lippo's options in addressing the offer, but market watchers say the group has three main choices: sell the shares, keep them or make a counterbid.
Selling may make sense. Some observers note Lippo has built up a name in the property sector - developing various condominiums and redeveloping two properties near Collyer Quay. It bought $681 million in collective-sale sites last year. Retail-wise, however, the jury is still out on Lippo.
Robinson has expanded to Kuala Lumpur and brought in new brands, but these have not been runaway successes. Lippo also has not done much to capitalise on its Robinson stake to promote its own Indonesian retailer, Matahari, or vice-versa.
Certainly, Lippo has heavy commitments on the property front. The $537 million cash offer from Dubai works out to $160 million for Lippo - a sum that may well come in handy.
One thing, however, may hold Lippo back from accepting Al Futtaim's offer: It would be absorbing a loss.
In 2006, it bought its stake from OCBC Bank and Great Eastern Holdings for $7.90 a share.
The offer is $6.25. Adjusted for dividends received since it took its stake, Lippo would stand to get about $7.68, which would still fall short of what it paid less than two years ago.
So, if Lippo just sits tight, Al Futtaim will need to cross the 50 per cent threshold without its help. It already has 23.19 per cent in the bag, pledged by Silchester International, Aberdeen Asset Management Asia and Tecity.
Robinson's shareholders, though, include many retail investors, making it more tedious to amass a large percentage quickly.
If Al Futtaim fails to cross 50 per cent, it will not have to buy the 23.19 per cent from the investors and everything returns to status quo - good news for Lippo.
The only fly in the ointment is that in such rocky markets, investors will be tempted, as $6.25 is still 40 per cent better than the share price just before the offer was made.
If so, Lippo could very easily go from being a controlling shareholder to being No. 2, with very little say in Robinson's affairs. As Lim and Tan Securities put it, Lippo could end up 'locked in'.
The third strategy could see Lippo making a counterbid if it really wants to keep Robinson.
The irony would be having to fork out a few hundred million dollars to control a company it is already controlling, having spent only $200 million.
Of course, if Lippo is sure that Al Futtaim is dead set on Robinson, it could put in a higher bid. Al Futtaim would have to raise its bid, allowing Lippo to exit gracefully, with a profit, no less.
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Source : The Business Times, January 21, 2008
Middle East-based Al-Futtaim yesterday made a surprise voluntary cash offer for all the issued shares in Robinson and Co (RCL) that it does not already own at $6.25 per share, valuing the company at $537.1 million.
The offer price is at a premium of 40.1 per cent to the last transacted price of RCL shares on Jan 18, the last day of trading prior to yesterday's announcement.
The group has set up ALF Global as a special vehicle for this transaction. ALF Global is indirectly held by Al-Futtaim Trading Company LLC, which is in turn 95 per cent owned by Al Futtaim Private Company LLC, and 5 per cent owned by Al-Futtaim Company LLC.
Al-Futtaim is believed to be one of four bidders keen on the OCBC group's stake in RCL when it was put up for sale in 2006. Indonesia's Lippo group eventually clinched that deal and owns a 29.9 per cent stake in RCL.
The latest offer sets the stage for another tussle for control at RCL. ALF Global yesterday said that it has to date as good as secured a 23.18 per cent stake in RCL.
The Al-Futtaim group has diverse interests in automotive, consumer electronics, retail, construction, engineering, logistics, insurance and real estate. It represents leading brands such as Ikea, Marks & Spencer and Chrysler in the Middle East.
The Robinson deal, if successful, will be Al-Futtaim's third asset in Singapore after Trade Alliance (S) and Perlini's, both in the watch and jewellery retail business.
Al-Futtaim said that it has been looking for strategic investment opportunities outside of the Middle East and views RCL as 'providing both complementary and synergistic benefits to the Al-Futtaim group'.
'RCL will be able to leverage on the Al-Futtaim group's retail expertise and serve as a platform for the Al-Futtaim group's geographical diversification in the South-east Asian region,' the offer document by Standard Chartered Bank read.
The group said that it believes that the offer presents RCL shareholders with the opportunity to realise their investments at a significant premium, given the lagging performance of RCL shares against the broader market and low liquidity.
The offer is conditional upon ALF Global receiving valid acceptances of more than 50 per cent of the voting rights by the close of the offer.
As at yesterday, three shareholders - Silchester International Investors, Aberdeen Asset Management Asia and Tecity run by Chew Gek Khim, the granddaughter of the late Tan Chin Tuan - have given their irrevocable undertaking to accept the offer. Together, they collectively hold 23.18 per cent of RCL.
They have also agreed to vote against any proposed action by RCL or its subsidiaries that could frustrate the offer. This includes voting against any dividend or other distribution by RCL; shares or rights issue; any assumption of liabilities by RCL or its subsidiaries of an amount exceeding $50 million; and disposal or acquisition of any assets that would fall within the relevant SGX listing rules.
But should a competing offer with more favourable terms arise, they are entitled to withdraw their acceptances of the offer and accept the competing offer.
This is provided that ALF fails to revise its offer on more favourable terms within stipulated timeframes, and if the competing offer is not pre-conditional and does not seek to acquire all or materially all the assets and businesses of RCL.
But should the competing offer become unconditional, a convenantor that has withdrawn its acceptance for ALF's offer and accepted the new offer is subject to a break fee penalty.
When contacted by The Business Times yesterday, Robinson CEO and director John Cheston said that he was informed about ALF Global's offer at 5.30 pm yesterday. The board will convene a meeting today to discuss this, he said.
Lippo's deputy chairman and Robinson director Stephen Riady also told BT he was alerted to the offer yesterday. Mr Riady was voted on board in 2006, along with the ousting of former Robinson chairman Michael Wong.
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