We never gave Robert Kuok credit - for his sense of humour until now, but his offer to privatise Kerry Properties at 47 cents on the dollar must be a joke. Back in 1996, the company's IPO was sold at 67 cents per dollar of NAV, and now with interest rates on the floor he wants to take it back. Perhaps he has not heard what happened to Henderson group in January.

Cash and Kerry
24 April 2003

Late last night, tycoon Robert Kuok Hock-nien's Kerry Holdings Ltd announced its proposed privatisation of Kerry Properties Ltd (KP, 0683) by Scheme of Arrangement, offering $8.50 per share in cash, a 52.62%. discount to the audited net asset value of $17.94 per share at 31-Dec-02. Well, we needed a joke to cheer us all up.

The deal has very little chance of success. When the company's IPO was launched on 23-Jul-96, Kerry was similarly greedy, pitching the offer price range at $19.50-21.50 per share, a discount range of 26.2%-19.5% against NAV. The market balked at that, and in the end, the company had to settle for an issue price of $17.50 per share for the offering of 150m shares, or 15% of the enlarged company. That represented a discount to NAV of around 33.0%, or put the other way around, a price of 67.0 cents per dollar of NAV.

Today, the offer is pitched at 47.4 cents per dollar of NAV. We think that if Mr Kuok wants to take his company private again, he should at least pay back that 67 cents on the dollar, which would work out at $12.02 per share.

Last November, we criticised Henderson Land's attempt to privatise Henderson Investment for an estimated 38% discount to fair value of its assets, and it was blocked by minority shareholders in January. In February, shareholders of Realty Development Corp Ltd approved its privatisation by New Asia Realty And Trust Co Ltd (part of the Wheelock group) at a discount of 18.8% to adjusted NAV per share. We did not object.

Independent shareholders own 24.08% of KP, and it takes just 2.408% (10% of the independent shares) to block the deal under the Takeover Code. Giant US institutional investor Capital Group owns 5.33%, and are not known for caving into low-ball offers. If the deal is blocked, then Kerry will have to wait another year, by which time the SARS outbreak will either be old news or nobody will need any property.

The three independent non-executive directors (INEDs) of KP since the IPO have been Victor Fung Kwok King, Roger Moss and Angelina Lee Pui Ling. Mr Moss, who until Nov-02 was a Senior Advisor to Goldman Sachs (Asia) LLC, and Mrs Lee, a partner of law firm Woo, Kwan, Lee and Lo, are both members of the Takeover Panel, as is your editor. So the INEDs should understand this situation well.

Webb-site.com editor David Webb is a shareholder of KP. We're going to fight this one. Shareholders who have contacted Webb-site.com today are universally against this offer.

© Webb-site.com, 2003

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