City Developments Limited (CDL) is planning to acquire all the outstanding shares it does not own in New Zealand-listed Millennium & Copthorne Hotels New Zealand Limited (MCK) for NZ$2.25 ($1.72) per share through its subsidiary, CDL Hotels Holdings New Zealand Limited (CDLHH NZ). Upon completion of the offer, CDL intends to delist and privatise MCK in order to simplify the ownership structure of its New Zealand entities, according to a filing made on Jan 20.
Currently, MCK owns, leases or has under franchise 18 hotels in New Zealand, and also has a majority stake in CDL Investments New Zealand Limited, as well as interests in properties in Australia through its Kingsgate Group 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 the compulsory acquisition provisions of the New Zealand takeovers code, it will acquire all outstanding shares in MCK. It may also choose to redeem the non-voting redeemable preference shares issued by MCK. CDLHH NZ has stated that it is willing to acquire the non-voting redeemable preference shares at the price of NZ$1.70 or around $1.30 per share, and will purchase them through its broker, Craigs Investment Partners, on the Main Board of the New Zealand Stock Exchange (NZX). As of Jan 17, CDLHH NZ currently holds 91.34% – or 48.17 million – of MCK’s non-voting redeemable preference shares.
The total consideration for the offer if all MCK’s shareholders accept it is expected to be NZ$57.29 million. Additionally, CDLHH NZ expects to pay approximately NZ$7.77 million for all of the redeemable preference shares it seeks to acquire.
The offer price for MCK’s shares and redeemable preference shares takes into account the current and historical market price, as well as the industry and business environment that MCK operates in. For the 1HFY2024 ended June 30, 2024, MCK recorded a net asset value (NAV) of NZ$532.02 million, and a net tangible asset value (NTA) of the same amount. The NAV and NTA attributable to the MCK shares subject to the offer are approximately NZ$85.62 million each as at June 30, 2024.
The offer is conditional upon CDLHH NZ receiving at least 90% of the voting rights in MCK by 5pm on May 2. It is also conditional upon 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.
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The implementation and payment of the offer is not expected to have a significant impact on CDL’s earnings per share (EPS) or net tangible assets (NTA) for the FY2025 ending Dec 31.