City Developments Limited (CDL) has announced that its wholly-owned subsidiary, CDL Hotels Holdings New Zealand Limited (CDLHH NZ), will make a public offer to acquire all the remaining shares of New Zealand-listed Millennium & Copthorne Hotels New Zealand Limited (MCK) at a price of NZ$2.25 ($1.72) per share.
Upon completion of the offer, CDL plans to delist and privatise MCK, which will simplify the ownership structure of the group’s New Zealand entities, according to a Jan 20 filing.
MCK currently owns, leases or franchises 18 hotels in New Zealand, as well as having interests in properties in Australia through its subsidiaries.
As of Jan 17, CDLHH NZ holds 80.02 million shares in MCK, representing a 75.86% stake based on 105.48 million MCK shares in issue. If CDLHH NZ reaches the threshold to invoke compulsory acquisition provisions under the New Zealand takeovers code, it will compulsorily acquire all outstanding shares in MCK. It may also choose to redeem non-voting redeemable preference shares issued by MCK.
The offer does not include non-voting redeemable preference shares, but CDLHH NZ is willing to acquire those at NZ$1.70 or roughly $1.30 per share. The purchase will be made through its broker, Craigs Investment Partners, on the Main Board of the New Zealand Stock Exchange (NZX). As of Jan 17, CDLHH NZ holds 91.34% or 48.17 million of the non-voting redeemable preference shares in MCK.
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If the offer is fully accepted by MCK’s shareholders, CDLHH NZ will pay a total of NZ$57.29 million. It also expects to pay approximately NZ$7.77 million for all redeemable preference shares it seeks to acquire.
The offer price for MCK’s shares and redeemable preference shares takes into consideration the prevailing and historical market price, as well as the industry and business environment in which MCK operates. As of June 30, 2024, MCK had a net asset value (NAV) of NZ$532.02 million and a net tangible asset value (NTA) of the same. The NAV and NTA attributable to the MCK shares subject to the offer were approximately NZ$85.62 million each as of June 30, 2024.
The offer is conditional upon CDLHH NZ receiving 90% or more of the voting rights in MCK by 5 pm on May 2. It is also subject to CDLHH NZ obtaining consent under the Overseas Investment Act 2005 of New Zealand and the Overseas Investment Regulations 2005 of New Zealand to own and control all shares in MCK.
The implementation and payment of the offer is not expected to significantly impact CDL’s earnings per share (EPS) or net tangible assets (NTA) for the fiscal year ending Dec 31, 2025.