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SINGAPORE (Sept 18): OUE Lippo Healthcare (OUELH), the healthcare subsidiary of OUE, announced Tuesday it plans to acquire stakes in SGX-listed First Real Estate Investment Trust (First REIT) as well as its manager, Bowsprit Capital Corporation, for a total consideration of $142.2 million.
Through wholly-owned subsidiary OLH Healthcare Investments, OUELH has agreed to pay $102.7 million to acquire 83,593,683 units in First REIT, or 10.63% of the total issued units, for $1.228 each.
This represents a discount of 7.5% to First REIT’s 90-day average intraday high price of $1.3276 per unit.
In addition, OUELH will acquire a 40% stake in the REIT manager for $39.6 million.
At the same time, parent company OUE will acquire the remaining 60% of Bowsprit. Following the acquisitions, Bowsprit will be held by a joint venture between OUE and OUELH.
The proposed acquisitions by OUELH are expected to be funded by proceeds from a 1-for-1 renounceable underwritten rights issue of approximately $150 million, which is supported by major shareholders OUE and ITOCHU Corporation.
The company is proposing to issue some 2.2 billion new shares at an issue price of 6.75 cents per rights share. This will be on the basis of one rights share for every one existing ordinary share held by entitled shareholders as at the books closure date.
In a statement on Tuesday, OUELH says the proposed acquisitions are in line with its strategy of expanding its business into Pan-Asian Healthcare region, and to grow an asset-light business model.
First REIT was the first healthcare real estate investment trust to be listed on SGX in 2006. It currently has a portfolio of 20 high quality healthcare-related properties with stable cash flows and long lease terms across Indonesia, Singapore, and South Korea.
OUELH says the proposed acquisitions are earnings accretive and cash flow generating, and are expected to enhance shareholder value. Based on the audited financial results of First REIT and Bowsprit for FY17, the acquisitions are expected to contribute earnings of 0.26 cents per share and distribution of $7.1 million to the group.
OUE and ITOCHU Corporation have given irrevocable undertakings to fully subscribe for their entitlements under the rights issue.
OUELH will be seeking the approval of its shareholders for the proposed acquisitions at an extraordinary general meeting to be convened.
“The proposed acquisitions will bring three key benefits to OUELH’s long-term strategic goals. Firstly, they enable the company to diversify into a key healthcare market such as Indonesia. Further, they fit well with our asset-light growth model and thirdly, they are earnings accretive, which enhances shareholders’ value,“ says Lee Yi Shyan, chairman of OUELH.
Oversea-Chinese Banking Corporation (OCBC) is the sole financial advisor to the company for the proposed acquisitions, and the manager and underwriter for the rights issue.
OUELH, First REIT and OUE had separately called for trading halts before market open on Tuesday.
Units in OUELH last closed flat at 12 cents on Monday, while units in First REIT closed 1 cent higher at $1.24 and shares in OUE closed 1 cent down at $1.54.