A successful acquisition of F&N would fit in well with OUE’s existing businesses, enabling it to scale up its fledgling property arm and providing a well-diversified income stream from various property segments, rather than its current high reliance on hospitality earnings, says DMG & Partners.
“The latest event is likely to complicate the Thais’ efforts to secure majority control of F&N. We believe the OUE consortium will have to offer a decent premium to have a fair chance of succeeding.” At a 10% premium to the Thai group’s $8.88/share bid, or around $9.80/share, an F&N bid would cost OUE $8.4 billion after stripping out the APB sale proceeds, it estimates.
As OUE would be financially stretched to make an offer, it could tie up with a partner, it notes; “there are no lack of suitors for F&N’s attractive F&B assets. As well, OUE could hive off its Mandarin Orchard hotel and Mandarin Gallery retail property for as much as $1.5 billion to potential interested buyers, and recycle capital from the proceeds into a property portfolio with scale and breadth.” F&N is down 0.1% at $9.25; OUE is up 1.1% at $2.74.
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