By Ben Martin
LONDON (Reuters) – A group of minority investors in Millennium & Copthorne Hotels has rejected a takeover offer from the company’s majority shareholder and called on other investors to follow suit to defeat the offer, which values the business at 2 billion pounds.
International Value Advisers, MSD Partners, and Classic Fund Management on Thursday said they would not tender their shares into the “highly opportunistic” 620 pence a share offer made by City Developments Limited on Dec. 8 for the 34.8 percent of FTSE 250-listed M&C that it does not already own.
The three investment firms said they represented about 37 percent of the shares targeted in CDL’s bid. The offer by CDL, the vehicle of Singaporean billionaire Kwek Leng Beng, is conditional on it securing acceptances from investors with more than 50 percent of the stock it does not hold.
The move by the trio marks an escalation of long-running investor opposition to CDL’s bid, which has already forced the Singaporean firm to raise its bid from a 552.5 pence per share proposal that M&C disclosed to the stock market on Oct. 9.
CDL declared its 620 pence a share offer “final” when it made the bid earlier this month, meaning it cannot be increased again.
Given that Kwek is also M&C’s chairman, the stance of the investors pits them against the head of the hotelier’s board. CDL’s bid has also been recommended by M&C’s independent directors.
“We will not tender our shares into such an unattractive offer at any time to help CDL reach the acceptance threshold of its offer,” the three investors said in a letter to the independent directors.
“It is our desire that other independent shareholders do the same once the offer is formally made, leaving the company to resume its business for the benefit of all its stakeholders.”
Shares in the hotelier fell 2 percent to 575.5 pence.
M&C owns, runs, invests in, or franchises a total of 137 hotels around the world and at issue is whether CDL’s offer reflects the value of the hotelier’s property assets.
IVA, MSD and Classic argued in their letter that CDL’s bid “fundamentally undervalues” the hotelier, which had a book value of 822 pence per share at the end of 2016.
Furthermore, that book value was based mainly on valuations from 2003 and so also “significantly understates the market value of the company’s assets,” the trio said.
In October Fidelity International, another M&C shareholder, also criticised CDL’s earlier 552.5 pence a share offer for not reflecting the value of the company’s property portfolio.
MSD is the firm that manages the family wealth of IT entrepreneur Michael Dell.
(Story refiled to correct second paragraph to read “Thursday” instead of “Friday”)
(Reporting by Ben Martin; Editing by Adrian Croft, Greg Mahlich)