Hwa Hong Corp announced a voluntary conditional offer to its shareholders by a consortium formed by its substantial shareholders (the offeror). The offer price of $0.370 in cash per exceeds all previous closing prices of the shares in the 9-year period up to and including May 12, 2022, being the last full trading day of the shares, and represents a premium of approximately 29.8% over the net asset value per share as at December 31, 2021, the Hwa Hong announcement says.
According to the announcement, the rationale for the offer provides shareholders with an opportunity to realise their investment at a premium, of approximately: (i) 27.6% over $0.290, the last traded price per share on the last trading date; (ii) 25.9% over $0.294, VWAP of the shares for the one-month period up to and including the last trading date; (iii) 22.1% over $0.303, the VWAP of the Shares for the three-month period; (iv) 12.8% over $0.328, the VWAP of the Shares for the six-month period up to and (v) 15.3% over $0.321, the VWAP of the Shares for the 12-month period up to and including the last trading date; and (vi) 29.8% over $0.285, the NAV as at Dec 31.
The company, as with many property-related businesses, faces a challenging and unprecedented macro and operating environment in Singapore and UK driven by Covid, geopolitical tensions and Brexit. Its office investment properties in the UK are ageing, the expected capital expenditure amidst the current inflationary environment and loss of income arising from refurbishments and redevelopments may impact the company’s future income. Leasing risks and potential delays may also affect future occupancies and rent outlook. According to hte announcement, the company may also not be able to monetise its assets at favourable capital values.
In addition, the rising interest rate environment may negatively affect the value of, and cashflows derived from, the company's investment properties through higher debt financing costs and higher discount or capitalisation rates, the Hwa Hong announcement says.
The Company has no Independent Directors presently. Recent board changes have resulted in a need for an independent review in the Company's internal controls, process and practices relating to the Board nomination process. The Company has had recent changes in management which may lead to uncertainty in executing any business plan and strategy. The offeror has secured irrevocable undertakings in respect of approximately 24.3% of the shares.
The offer is conditional on the offeror and parties acting in concert with the Offeror holding more than 50% of the total number of shares as at the close of the offer. The offer document setting out the terms and conditions of the offer and enclosing the relevant form(s) of acceptance will be despatched to shareholders not earlier than 14 days and not later than 21 days from the offer announcement date (May 17).