How the game was played?

The Trizon - by UIC/SingLand
The only residential project no fully sold yet

This is an old article from The Edge in beginning of 2009. However, I think this is an excellent article to illustrate some rules to play the game of taking over in Singapore.

At least now we know for sure that if UOL or JG Summit are to offer new deal in coming 6 months, it will never lower then $2.40 now.

Written by Goola Warden

Saturday, 17 January 2009 16:01

WHAT IS billionaire banker and property magnate Wee Cho Yaw’s strategy for United Industrial Corp (UIC)? The octogenarian chairman of United Overseas Bank is clearly unfazed by the bearish outlook for the local property sector. Last Wednesday, he seized the bear market by the paws and used UOL Group to make a bid for the shares in UIC that he does not own. If UOL and friendly parties succeed in getting more than 50% acceptances for UIC, it would catapult the duo to among the top-three listed Singapore developers.

Yet, how determined is Wee? The $1.20 per share offer for UIC is seen as a bit of a “lowball” effort by the market. Lim & Tan states in a report issued last week: “Although there is usually no urgency to do anything with an existing position in a takeover situation, we would not chase UIC in anticipation of a counter-bid, just because [John] Gokongwei would need to offer $2.85 if he were to counter, that being the highest he paid in the last six months.” This is stipulated by the takeover code.

Gokongwei is the largest shareholder in UIC with a 35.1% stake. His latest purchase of 800,000 shares was on Jan 15, just after UOL’s offer. Prior to that, he had bought 600,000 shares on Jan 9. And he could technically keep on buying 1% (1.3 million shares) every six months. There’s nothing to stop him.

Interestingly, Gokongwei need not make a general offer at $2.85. He could just wait until the present general offer lapses. The offeror has the right to extend the offer but the offer document already states that UOL won’t raise the price unless there is a competing offer. After UOL’s offer lapses in about a month, Gokongwei could make his own general offer.

After UOL’s offer lapses in about a month, Gokongwei could make his own general offer. By then, his highest purchase price would be less than $2.85. Indeed, if the Filipino tycoon makes his offer in say, March, he could theoretically propose a lower price of $1.30 or $1.40, depending on the highest price he paid in the prior six months. The lower the price, the lower he is able to target his offer. His last general offer in 2005 was at $1.09. And, if the $1 cost for his initial stake in 1999 is taken into account, Gokongwei’s average cost for his 35.1% portion could be at around $1.16 — lower than the offer price of $1.20.

But there is a big unknown: Will Morgan Stanley accept the $1.20 offer from the Wee stable? The US investment bank still holds some 165 million shares or 12% of UIC. In December, the bank sold some shares, and in January this year, it bought them back. Most market watchers reckon it is a potential seller if the price is right as the US financial sector is shoring up their balance sheets amid the financial crisis.

http://www.theedgesingapore.com/component/content/1700.html?task=view