Sunday, 8 June 2014

The Last Stand on CapitaMalls Asia

Perhaps by 8am Monday morning, this blog post would have been overtaken by events. Nevertheless, I still wish to share my actions and rationale on the privatisation of CapitaMalls Asia (CMA) by Capitaland.

As mentioned in my blog post 3 weeks ago on Playing Poker With Capitaland Over CapitaMalls Asia, I would accept Capitaland's privatisation offer if it manages to own more than 90% of the shares so as not to be caught in the no-man's land where Capitaland has acquired sufficient shares to delist CMA but insufficient to compulsorily acquire all the shares. On the morning of 5 Jun 2014, Capitaland announced that it has acquired more than 90% of the shares, allowing it to delist CMA after the close of the offer on Monday 5.30pm (unless the offer is extended).

On the morning of 6 Jun 2014, I sent in the acceptance form for the privatisation offer, but only for 6 out of the 10 lots that I owned. I calculated that the sales proceeds from the 6 lots is about sufficient to cover the cost of the 10 lots, allowing me to own 4 lots at no cost in the soon-to-be-delisted CMA. Why wasn't I gracious enough to concede defeat and accept the offer for all 10 lots?

While the battle against privatisation of CMA has been lost, the war against privatisation in general is not over yet. Over the years, many companies have been delisted. You may refer to this post for a list of the 129 companies that have been delisted since 2009. Some of these companies are not small unknown companies; they are on the Who's Who list of Singapore's biggest companies. A sample of these companies are:
  • Allgreen Properties, developer of the Queens condominium, the highest condominium in Singapore;
  • Asia-Pacific Breweries, manufacturer of Singapore's Tiger Beer;
  • Cerebos Pacific, manufacturer of Brand's Essence of Chicken;
  • Chartered Semiconductor, the world's second largest integrated chip foundry; and
  • Robinson's, the departmental store that made famous the phrase "the sale worth waiting for".

Added to this list will be CMA, Singapore Land and possibly Hotel Properties Ltd and Goodpack. At the rate that we are going, there would not be many good companies left to invest in on the Singapore Exchange (SGX). So, one reason why I kept holding on to 4 remaining lots is to do my part in slowing the pace of privatisation, until minority shareholders realise that we are actually shortchanging ourselves by killing the goose for the golden egg in most privatisation deals. The ideal state is that Capitaland can only delist but not compulsorily acquire all the shares and fully privatise CMA. While it may be a no-man's land for minority shareholders if Capitaland's share ownership ends up between the levels for delisting and compulsory acquisition, it is also a no-man's land for Capitaland as well. Capitaland also would not want to be struck in this no-man's land, where it cannot integrate CMA into itself and CMA's Annual General Meetings (AGMs) still need to be held. Hence, a privatisation deal ending in limbo would serve as a precaution for companies wishing to privatise other companies listed on the SGX.

As for the other privatisation deals ongoing currently, I cannot advise minority shareholders to reject the offers, since I do not share their losses if the privatisations were to become unsuccessful. But for CMA, I have a stake in it and I have acted in accordance to what I feel.

The other reason why I kept onto the 4 lots is to experience life as a shareholder in an unlisted company. Generally, regular dividends cannot be expected in an unlisted company, but when the majority shareholder wishes to transfer money from the company to itself, it will have to do it via dividends and/or capital reduction. Minority shareholders will get their rightful share. And CMA would have to continue holding AGMs. It is ironic that I seldom attend AGMs of listed companies, but if CMA were to become a public unlisted company, I believe I will be attending their AGMs quite regularly.

I half suspect that if some company were to offer to privatise KeppelCorp at $20, the privatisation would really go through. However, let us take a step backwards and consider which is more valuable: $20 in the pocket or KeppelCorp as a listed entity? There are things that money cannot buy, and unlisted companies are one of them. No matter how much you like Tiger Beer and Brand's Essence of Chicken, you can never buy the shares of companies that produce them.

P.S. On the same day that I accepted partially the privatisation offer for CMA, I also accepted the takeover offer for ASJ Holdings. I will also be accepting the delisting offer for China Powerplus. Both these companies have been making losses for years and there is no point in continuing to hold on to these stocks. You may wish to refer to Investors' Guide to Privatisation Deals on whether to accept or reject different types of privatisation offers.

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