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The following is the excerpt from OCBC Investment Research after the cash offer by UOL for UIC shares. Same thing may happen soon but the reaction could be totally different. We will see.

By Foo Sze Ming
OCBC Investment Research
Thu, 15 Jan 2009, 09:07:33 SGT

Yesterday, UOL Group announced a mandatory conditional cash offer of S$1.20 per share for United Industrial Corporation Limited. Depending on the outcome of the takeover, UOL could also be making an offer for Singapore Land Ltd at S$3.57 per share. We believe that the takeover is positive for UOL over the long term as it could be getting a portfolio of prime office buildings at undemanding valuations. UOL will have to pay S$1,560m to complete the takeovers. Fortunately, both UOL and UIC have conservative balance sheets and we believe that UOL’s post-takeover balance sheet will not be overstretched. However, we think it is unlikely for UIC shareholders to accept the offer at this depressed valuation. We believe that the takeover could fail but UOL could end up with a greater stake in UIC. We maintain our BUY recommendation for UOL with fair value of S$2.88.

Can the takeover pull through? Comparing to UIC’s share price band of S$0.97-S$3.16 in 2008, the offer is close to lower bound of the band. We believe that many shareholders (including substantial shareholder, JG Summit with 35.1% stake in UIC) would have accumulated UIC’s shares at significantly higher prices and thus think it is unlikely for UIC shareholders to accept the offer at this depressed valuation. We believe that the takeover could fail but UOL could end up with a greater stake in UIC. We maintain our BUY recommendation for UOL with fair value of S$2.88.


By Carmen Lee
Wed, 4 Mar 2009, 08:19:26 SGT

UOL’s offer of S$1.20 per UIC share closed yesterday evening and by the closure of the offer, UOL and its related parties only managed to secure a total of 674,184,971 UIC shares (48.94% of issued shares) under their control. As the group failed to gain control of more than 50% of the voting rights, the offer had not become unconditional and had therefore lapsed. As such, no offer will be made for SingLand’s shares and 46,463,706 UIC shares (3.37% of issued shares) will be returned to shareholders who had earlier accepted the offer. However, through open market purchases made earlier, UOL had increased its stake in UIC by 15.34% (211,336,465 shares), resulting in UOL now holding an effective stake of 30.78% (423,975,665 shares) in UIC. As a result, UIC will become an associated company of UOL and is expected to contribute to UOL’s bottomline going forward. The above outcome was in line with our expectation. Key risk comes from the decline in UIC’s share price after the offer, which will negatively affect our RNAV and fair value estimates. We maintain our BUY rating on UOL with fair value of S$2.59. (Foo Sze Ming)

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