Source : The Business Times, January 29, 2008
Revised offer of $6.50 suggests they're ready for bidding war with Lees
The family of the late Tan Chin Tuan has upped the ante in the contest with OCBC Bank's Lee family for Straits Trading Company.
The Tans, through private vehicle Cairns Pte Ltd, yesterday announced a revised offer of $6.50 a share, up 80 cents from their original offer of $5.70.
And in remarks read by some as a dig at their bidding rival, Chew Gek Khim, granddaughter of the late Tan Chin Tuan, said: 'Our significant offer price revision of 14 per cent is a reflection of our regard for the company and management of Straits Trading.' Ms Chew is a director of Cairns.
In comparison with the 14 per cent increase, the Lees, who control OCBC, had last week countered the Tans' $5.70 bid with only a marginally higher offer of $5.76.
Cairns has also taken the unusual step of sending letters to Straits Trading's substantial shareholders OCBC and Great Eastern Holdings (GEH) and announced that, should OCBC and GEH accept the offer, Cairns and parties acting in concert with it would own 49.73 per cent of Straits Trading.
OCBC and GEH own 6.21 per cent and 19.92 per cent of Straits Trading respectively.
The bold moves have not gone unnoticed by the market, with one unnamed trader saying the tenacity reflects the nature of the two families involved.
The Lees and Tans are illustrious business households in Singapore, with ties that date back more than half a century. The late Mr Tan Chin Tuan made his fortune working for the Lee family at OCBC.
The late Lee Kong Chian, patriarch and philanthropist, managed OCBC from 1938 to 1964, then handed the reins to Mr Tan from 1964 to 1983.
The two families are now vying for control of the company from which Mr Tan retired as chairman in 1992 at the age of 84. Straits Trading has interests in property, hotels and one of the world's largest tin smelters.
Given their history, all bets are on the Lees fighting hard to keep Straits Trading in their stable of companies - and on another counter-offer being made to out-do the Tans.
The likelihood of a counter-offer also depends much on whether current bids still undervalue Straits Trading - which most analysts believe they do.
Gabriel Yap, of Phillip Securities, says: 'The original offer of $5.70 undervalued Straits Trading's assets, especially with the new Straits Trading building coming on stream at a time when its neighbour, 6 Battery Road, was already achieving rent of $16.70 psf and is now asking $18 to $22 psf. And the current scarcity in the supply of office space is going to be a theme until about 2010. Not to mention, Straits Trading also has other undervalued assets.'
He adds: 'Both the Lee and Tan families belong to the Old Rich, whose businesses are now run by very smart descendants. You'll note that these offers were made only after the market pulled back substantially after five years of a firm uptrend. If the Lees think the $6.50 offer undervalues the company's assets, in light of the current operating environment, I would not be surprised if a counter-offer is made.'
Mr Yap also thinks the Tan family will have the stomach for an all-out bidding war, with its coffers likely to be padded by the impending sale of its stake in retailer Robinson & Co.
Clearly, the shareholders of Straits Trading will benefit the most. The company's share price shot up 11 per cent or 67 cents to close at $6.56 yesterday after news of Cairns' revised offer broke. And the price is set to rise further, should a counter-offer come from the Lees.
Ms Chew referred to the rise in Straits Trading's share price since Cairns made its initial $5.70 offer: 'Since Jan 4, the date preceding the announcement of our offer, the share price has risen significantly as against the broader decline of the market,' she said. 'We have therefore enhanced shareholder value significantly through our offers.'
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