CDL's two earlier offers met rejection by Millennium & Copthorne's IDs

INDEPENDENT directors of Millennium & Copthorne Hotels (M&C) rejected two earlier offers by Singapore-listed parent City Developments (CDL) before agreeing to support a potential privatisation bid at 552.5 pence per share, the companies said in a joint statement on Friday.

CDL has until Nov 6 to announce whether it will make an offer for M&C, its hospitality subsidiary.

CDL approached M&C's independent directors on Aug 21 offering 510p per share in cash, but that proposition was rejected outright, the companies said. A revised bid was made on Sept 14, but that was rejected as well on the basis of value.

The final proposal is for 545p per M&C share and a special cash dividend of 7.5p per M&C share. M&C's independent directors have said that they will support an offer at that price. Those directors have been advised by Credit Suisse that the price is fair and reasonable.

In explaining its intentions, CDL argued that M&C currently faces challenges from intensifying competition, geopolitical instability and technological disruption.

"CDL believes that to improve and maintain M&C's competitiveness, M&C needs to progress its capital expenditure refurbishment programmes in a number of hotels," CDL said. "This is expected to be a near-term, ongoing process which CDL believes will likely further impact M&C's earnings.

"CDL believes that M&C's challenges and long-term financial requirements can be better navigated if the company becomes a private entity, for which nimbleness and flexibility will be a distinct advantage."

CDL could face some resistance from M&C's minority shareholders if its pushes ahead with its plan. Fidelity International, which owns just under 3 per cent of M&C's shares, had come out in opposition of the offer, arguing that the offer does not adequately value M&C's properties.

CDL, which currently holds 65.2 per cent of M&C's shares, said that its proposed offer will be conditional upon the bidding vehicle, a wholly owned subsidiary of CDL, obtaining acceptances exceeding 50 per cent of M&C shares not already owned by the CDL group.

CDL is also currently seeking consent from New Zealand authorities on matters related to the indirect acquisition of interests in sensitive land and significant business assets. Discussions about the regulatory approvals that parties will be required to seek and obtain, if a takeover bid is made, are currently taking place between CDL and M&C's independent directors, said CDL, a property development group.