Kwek Leng Beng, the Singaporean billionaire attempting to take over Millennium & Copthorne Hotels (>> Millennium & Copthorne Hotels plc), defended his bid on Monday after a group of investors argued it was too low and sought to block the deal.
The chairman of City Developments Limited (CDL), which has offered to buy out minority investors in the FTSE 250 hotelier for 620 pence a share, urged M&C shareholders in a letter "to consider the very material premium and value" of its bid.
Three minority investors in the hotel chain last week rejected CDL's offer for the 34.8 percent of M&C it does not already own.
International Value Advisers, MSD Partners, and Classic Fund Management urged other investors to join them and block the bid, arguing that the offer, which values the business at 2 billion pounds ($2.68 billion), fundamentally undervalued the hotelier.
The three investment firms, who represent about 37 percent of the shares targeted by CDL, said the bid failed to reflect the value of the hotelier’s property portfolio.
Kwek said the investment firms' argument was "somewhat disingenuous" and based on "the false premise of unrealised real estate value".
"The CDL board sincerely hopes that the actions of a few shareholders who have entered since the financial crisis will not preclude a number of long-term shareholders from being able to take advantage of this offer to exit from their holding in an illiquid stock at a real and significant premium," Kwek said in the letter.
M&C is behind 137 hotels around the world, which it either owns, operates, invests in, or franchises.
CDL needs to secure acceptances from investors holding more than 50 percent of the stock not already owned by Kwek for the deal to go through.
The Singaporean company has declared its offer final, meaning it cannot be increased under the UK's takeover rules.
The dispute puts the trio of investors at odds with the head of the hotelier's board because Kwek is also chairman of M&C. CDL's offer has also been recommended by the hotelier's independent board directors.
Kwek said in his letter that CDL's board had carefully considered the arguments put forward by a "small number" of M&C investors, who want the bid to be based on the company's net asset value (NAV).
He said that "these valuations only exist in theory and if attempts were made to crystallise them, would prove ethereal".
The CDL chairman defended his offer by arguing that the current practice for valuing hotel asset portfolios was based on multiples of either net profit or earnings before interest, taxes, depreciation and amortisation, rather than NAV.
($1 = 0.7465 pounds)
(Reporting by Ben Martin; Editing by Edmund Blair and Adrian Croft)
By Ben Martin