Singapore’s CDL Offers to Buy Out Millennium & Copthorne Hotels in $822M Deal

Singaporean property heavyweight City Developments Limited (CDL) has offered to buy out the outside investors in its Millennium & Copthorne Hotels, in a deal that values the London-listed global hotelier at £1.8 billion ($2.4 billion).

CDL, which already holds a 65.2 percent stake in Millennium & Copthorne (M&C), would acquire the remaining 34.8 percent interest for £624.3 million ($822 million) under the terms of the proposed offer. Through the acquisition, CDL – publicly listed flagship of Singapore’s Hong Leong Group – would retake full ownership of the hotel operator it launched in 1995.

The move extends a global flurry of deals by CDL this year, and comes amid a leadership change for the development giant as Sherman Kwek, the elder son of Singaporean billionaire Kwek Leng Beng, prepares to take over as CEO.

CDL Wants Its Hotel Operator Back

M&C said in an announcement to the London Stock Exchange that CDL had reached agreement with the independent non-executive directors of M&C on the price at which the hotel group’s independent directors would recommend a possible cash offer.

Under the terms of the proposed buyout, shareholders in the hotel chain would receive 545 pence ($0.719) per share, plus a special dividend of 7.5 pence per share. The offer is a premium of 21.4 percent over M&C’s closing share price on Friday of last week. After the offer was announced shares in M&C jumped to 553 pence.

The independent directors “consider the financial terms of the Proposed Offer to be fair and reasonable” and intend to unanimously recommend the offer to shareholders, according to the statement, which added that there is no certainty that a formal offer will be made (the deadline is November 6).

“CDL confirms that it intends to maintain M&C’s current business model, in particular to run the business as an owner and operator of its hotel portfolio,” the statement said. “CDL also confirms it has no intention to sell or repurpose any of M&C’s hotels in London or in New York.”

M&C, which operates the Millennium, Grand Millennium, Copthorne and Kingsgate brands, has a portfolio of over 130 hotels in 17 countries around the world, from the Millennium Biltmore Los Angeles to the Grand Millennium Beijing. The hotelier has focussed on expansion in gateway cities including New York, London and Singapore – it currently has six properties in the island city – as well as Greater China where it runs 11 hotels.

The company accounted for 49 percent of CDL’s revenue in the first half of 2017, according to an analysis cited by Reuters. CDL took M&C public in 1996 after forming the company by purchasing the Copthorne hotel chain from Aer Lingus.

Singaporean Giant on Expansion Drive

The proposed offer would represent one of the largest transactions in recent memory for CDL, as the firm with a market cap of S$10.74 billion ($7.9 billion) continues to build up its global presence. In June, affiliated vehicle CDL Hospitality Trusts (CDLHT) bought up the four-star Pullman Hotel Munich for €98.9 million (about $112.3 million).

This past February, CDL added to its holdings in Britain by picking up a residential site in London’s Battersea district for £58 million ($72.4 million). The developer has also diversified into China’s co-working sector by investing RMB 72 million ($10.5 million) for a stake in Shanghai-based shared office operator Distrii in January.

Closer to home, CDL and sister company Hong Realty paid S$906.7 million ($667 million) just last week to acquire the Amber Park development in Singapore’s biggest-ever collective sale of an existing freehold housing project. The deal also marks one of the largest residential investments for CDL in recent years.

A new Kwek generation is taking over the family led firm, after private equity veteran Grant Kelley stepped down as CEO in August. Sherman Kwek is currently serving as CEO-designate, working alongside Kelley to ensure a smooth handover before he assumes full responsibilities as CEO on January 1 next year.

Kwek Leng Beng serves as executive chairman of both CDL and its parent conglomerate Hong Leong Group.