FRASERS Property Ltd. is proposing to take its listed hospitality arm private at a value of S$1.35 billion ($970 million) after the pandemic hammered the hotel and tourism business.
The company — backed by Thai billionaire Charoen Sirivadhanabhakdi — is offering S$0.70 per share for Frasers Hospitality Trust, a Singapore-based real estate investment trust, according to a joint statement on Monday.
The move comes after a strategic review that found the REIT still faces long-term challenges despite efforts to unlock value. The endemic nature of Covid-19 presents “significant risks” to the hospitality sector even as it recovers gradually, while looming recessionary pressures and geopolitical tensions add uncertainty, the statement said.
Frasers Hospitality Trust — whose biggest shareholder is Charoen’s conglomerate TCC Group — grew its portfolio valuation by 35% since its initial public offering in 2014. But it hasn’t managed to boost net asset value due to muted growth in the hospitality sector and a strengthening Singapore dollar, it said. The company’s small size also limits its ability to benefit from a continued listing.
“Without sufficient scale, FHT has not been included in major stock market indices and has been limited in its flexibility in undertaking asset acquisitions for growth,” it said.
As such, the proposed privatization “is the best option and represents a credible opportunity for our stapled securityholders to realize their investments at an attractive valuation,” FHT’s Chief Executive Officer Eu Chin Fen said in the statement.
The acquisition will be financed with banking facilities totaling about S$505 million obtained from Bank of America Corp., along with internal cash resources, Frasers Property said in a separate statement.
BofA Securities Inc., DBS Group Holdings Ltd. and Oversea-Chinese Banking Corp. are advising on the transaction.
Should the deal fall through, it will be business as usual and the company will continue to pursue its existing strategies, Eu said at a news briefing on Monday.
Shares of Frasers Hospitality were suspended on June 9 at S$0.66. The stock has jumped 42% this year following declines in the previous two years, giving it a market value of S$1.27 billion.
The offer represents a 43.8% premium to the volume-weighted average price in the 12 months to April 7, the day before the announcement of the review, according to the statement. Bloomberg reported that the company was weighing a privatization at the time.
Singapore’s hospitality REITs have seen a sell-off since the pandemic struck, battering the travel industry. The country will take “a few years” to return to pre-Covid tourism, Singapore Tourism Board Chief Executive Officer Keith Tan said in April.
With a portfolio valued at S$2 billion, Frasers Hospitality Trust oversees 14 properties across Asia, Australia and Europe, according to its website. The company reported higher revenue per average room across its Asia-Pacific and Europe portfolios, it said in its first-quarter business update in February. — Bloomberg