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Is the restructure of Capitaland fair for retail shareholders?
26 Mar 2021 (169 views)

My friend said that he will vote against the restructure of Capitaland as the deal is not fair to retail shareholders. He said that Temasek will get the development business for free.

I do not know enough details about the deal to say if I agree or disagree with his view. 

I present some figures for study.

At the last financial report, the net asset per share for Capitaland was $4.73. Prior to the announcement of the restructure, the share price was $3.31. It was trading at a discount of 30% on the asset value ,or $1.42 per share ($4.71-$3.31).

The deal with give the shareholders (excluding Temasek Holdings) a package comprising of shares and cash worth $4.10. However, the price of the shares will be based on the asset value. (I believe this to be the case, although I have not studied the actual figures.

This means that the remaining asset value of $0.63 goes to Temasek "for free". Actually, this value is retained in the privatized Capitaland which is fully owned by Temasek and will continue the development business.

This means that the discount of $1.42 is shared as follows:

$0.63 goes to Temasek (my friend said that this is "for free")
$0.79 (i.e. $4.10-$3.31) goes to the other shareholders.

Temasek is getting 44% of the "hidden value" from the restructuring exercise for taking over the risk of the developing business. My friend said that this given to them "for free".

Would the non-Temasek shareholders of Capitaland be better off keeping the existing company? My friend argued that they will be.

I am inclined to support the restructure of Capitaland as it allows the shareholders to unlock and receive 56% of the hidden value. Maybe Temasek is too greedy in asking for 44%, but are there any other bidders?

Disclaimer: I am sharing an opinion. I am not giving investment advice whether to support or object to this deal

Tan Kin Lian




 


Is the restructure of Capitaland fair for retail shareholders?
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My friend said that he will vote against the restructure of Capitaland as the deal is not fair to retail shareholders. He said that Temasek will get the development business for free.

I do not know enough details about the deal to say if I agree or disagree with his view. 

I present some figures for study.

At the last financial report, the net asset per share for Capitaland was $4.73. Prior to the announcement of the restructure, the share price was $3.31. It was trading at a discount of 30% on the asset value ,or $1.42 per share ($4.71-$3.31).

The deal with give the shareholders (excluding Temasek Holdings) a package comprising of shares and cash worth $4.10. However, the price of the shares will be based on the asset value. (I believe this to be the case, although I have not studied the actual figures.

This means that the remaining asset value of $0.63 goes to Temasek "for free". Actually, this value is retained in the privatized Capitaland which is fully owned by Temasek and will continue the development business.

This means that the discount of $1.42 is shared as follows:

$0.63 goes to Temasek (my friend said that this is "for free")
$0.79 (i.e. $4.10-$3.31) goes to the other shareholders.

Temasek is getting 44% of the "hidden value" from the restructuring exercise for taking over the risk of the developing business. My friend said that this given to them "for free".

Would the non-Temasek shareholders of Capitaland be better off keeping the existing company? My friend argued that they will be.

I am inclined to support the restructure of Capitaland as it allows the shareholders to unlock and receive 56% of the hidden value. Maybe Temasek is too greedy in asking for 44%, but are there any other bidders?

Disclaimer: I am sharing an opinion. I am not giving investment advice whether to support or object to this deal

Tan Kin Lian