City Developments Limited (CDL) is making a proposal to acquire all the outstanding shares it does not currently own in New Zealand-listed Millennium & Copthorne Hotels New Zealand Limited (MCK). The offer, which is valued at NZ$2.25 ($1.72) per share, aims to simplify the ownership structure of the group’s New Zealand entities.
According to a Jan 20 filing, CDL’s wholly-owned subsidiary, CDL Hotels Holdings New Zealand Limited (CDLHH NZ), plans to delist and privatize MCK following the completion of the offer. MCK currently owns, leases, or has under franchise 18 hotels in New Zealand and has a majority stake in CDL Investments New Zealand Limited, as well as interests in properties in Australia through its Kingsgate Group subsidiaries.
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As of Jan 17, CDLHH NZ holds 80.02 million shares in MCK, which represents 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. CDLHH NZ may also choose to redeem the non-voting redeemable preference shares issued by MCK.
The offer does not include MCK’s non-voting redeemable preference shares, but CDLHH NZ has expressed its willingness to acquire them at NZ$1.70, or approximately $1.30 per share. The shares will be purchased through a broker, Craigs Investment Partners, on the Main Board of the New Zealand Stock Exchange (NZX). As of Jan 17, CDLHH NZ holds 91.34%, or 48.17 million, of MCK’s non-voting redeemable preference shares.
If all of MCK’s shareholders accept the offer, the total consideration paid by CDLHH NZ will be NZ$57.29 million. Additionally, the group expects to pay around NZ$7.77 million to acquire all of the non-voting redeemable preference shares. The offer price takes into account the current and historical market price, as well as the industry and business environment in which MCK operates.
As of 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 for the 1HFY2024. The NAV and NTA attributable to the MCK shares subject to the offer are approximately NZ$85.62 million each.
The offer is subject to certain conditions, including CDLHH NZ receiving 90% or more 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 and the Overseas Investment Regulations 2005 of New Zealand to own and control all the shares in MCK.
The implementation and payment of the offer are not expected to significantly impact CDL’s earnings per share (EPS) or net tangible assets (NTA) for the 2025 fiscal year ending on Dec 31.