Lees Withdraw Offer For Straits Trading

Source : The Business Times, March 3, 2008

They are accepting Tan family’s $6.70 a share offer, citing volatile market conditions.

The protracted battle for The Straits Trading Company (STC) has come to an abrupt end with OCBC Bank’s founding Lee family suddenly withdrawing its offer for the mainboard company and accepting the $6.70 per share competing offer from the Tan family’s The Cairns.

In an announcement released yesterday, the Lee family vehicle Knowledge Two Investment Pte Ltd said that it was ‘withdrawing its offer with immediate effect’ and citing ‘volatile market conditions’ among other things.

‘Any acceptances of the offer prior to or after the date of this announcement will be deemed not to have been made,’ it added.

In its reasons for the withdrawal, Knowledge Two Investment noted that in response to its offers of $5.76 and $6.55 per share on January 24 and February 14 respectively, The Cairns had increased its offer price by $1 per share or 17.5 per cent from its original offer price of $5.70 per share.

‘This has increased total STC shareholder value by approximately $326 million,’ the statement added. ‘Taking into account the foregoing as well as the current volatile market conditions, the offeror and the Lee family companies holding in aggregate approximately 7.1 per cent of the total number of issued shares, have decided to realise their investments in STC and accept the Cairns offer at $6.70 per share.’

This effectively ends a battle which saw two of Singapore’s most famous corporate families - the Lees and the Tans, which have been linked for decades through OCBC Bank - on opposite sides in a contest for one of Singapore’s oldest listed companies.

It began on Jan 6 when the Tan family - led by Ms Chew Gek Khim, the grand daughter of the late OCBC chairman Tan Chin Tuan - made an offer of $5.70 per share for Straits Trading.

Then on Jan 24, the Lee family made a counterbid of $5.76 per share. The Tans - who at the time held about 22 per cent - swiftly responded on Jan 28 by raising their offer to $6.50 per share.

The Lees then came back with a second counter offer of $6.55, which the Tans matched and upped at $6.70 per share.

Caught in the middle of it all were OCBC Bank, which owns 6.21 per cent in Straits Trading, and insurance giant Great Eastern Holdings which has 19.92 per cent - second only to the Tan family’s current stake of about 26 per cent.

Though the Lee family has a relatively small stake in Straits Trading - much smaller than the Tans - it is a key shareholder in both OCBC and Great Eastern.

OCBC last month rejected the takeover offers for its shares in Straits Trading, saying it could extract greater value for itself by staying put and adopting a more proactive role in the company. The bank also noted that Straits Trading has a cash surplus of $347 million and a realestate portfolio worth at least $1.33 billion. It also said it would seek board representation at Straits Trading as well as request the board to appoint a financial adviser to study ways to unlock value and enhance shareholders’ value.

Aberdeen Asset Management, which owns about 2.5 per cent of Straits Trading, said last week that it would choose the option that would realise the maximum value in Straits Trading.

Great Eastern has remained mum so far.

Not surprisingly, the battle between the two famous families has enthralled corporate Singapore, and fanned much speculation as to why things have come to a head over the tin smelter.

One theory has to do with OCBC’s recent sale of its stakes in companies like Robinson and Raffles Hotel.

There is speculation that the Tan family - especially Ms Chew - is unhappy with the moves, which could be seen to be unwinding the legacy that her grandfather built up.

OCBC’s stake sales have been driven by changes where financial regulators hold banks back from having significant non-banking businesses.

But the Tan family could be worried that any decreasing involvement of the Lees in the bank could speed up the divestment process. Although former OCBC chairman Lee Seng Wee’s son Tih Shih, 44, sits on the OCBC board, none of the third generation of the Lees is as closely involved in the banking business as previously.

The fear amongst the Tans could be that as the Lees exit the business and OCBC sells its non-bank assets, they would have to deal with less-than-friendly majority owners in these companies where they still hold significant stakes.