Billionaire Bids HK$48B to Privatise HK Developer Wheelock

Hong Kong property billionaire Peter Woo is offering to take Hong Kong-listed Wheelock & Company private in a deal worth just under HK$48 billion ($6.2 billion), according to a stock exchange filing.

Woo, whose family controls the 93-year-old firm chaired by his son Douglas Woo, is offering the equivalent of HK$71.90 for each issued share in the company that he does not already control, amounting to 32.5 percent of the issued stock, to take Wheelock private.

The bid by Hong Kong’s eighth richest man, who controls a personal fortune of $13.1 billion according to Forbes, represents a 52 percent premium over Wheelock’s closing price of HK$47.25 per share when trading was halted at 9.00 am on 24 February.

Offering a Cocktail of Cash and Stock

Wheelock said in its filing that privatisation would unlock value for shareholders by removing the current tiered shareholding structure, as well as creating higher trading liquidity and increasing dividends for both Wharf REIC and Wharf Holdings.

“The proposal aims to unlock immediate value for shareholders through the elimination of the company’s historical holding company discount associated with the existing tiered shareholding structure,” the announcement stated.

Under the terms of the proposed deal, Woo is making a cash and stock offer equivalent to HK$12 per share, including handing Wheelock stockholders one share each of Hong Kong-listed Wheelock subsidiaries Wharf REIC and Wharf Holdings.

The cash consideration of HK$8.15 billion will be financed through cash and debt, according to the joint statement by Wheelock and BVI company Admiral Power Holdings, which Woo is using to make the offer to shareholders.

If the offer is accepted by the stated Long Stop Date of 31 December 2020, Wheelock & Company will be delisted from the Hong Kong stock exchange.

Wheelock shares jumped by 50 percent to HK$71 when trading resumed at 1.00 pm on 27 February, hitting its highest ever mark since listing. The stock closed out the week at HK$59.35 per share.

Buying Low

Woo’s privatisation bid comes as stocks have tumbled on the Hong Kong exchange off the back of 2019’s anti-government protests and this year’s coronavirus outbreak.

On 21 February, shares in Wheelock were trading at HK$47.25 each, down more than 20 percent from their April 2019 high of HK$59.20, as corporate equities in the Asian financial hub have been hammered by months of bad news.

Just two days ago, Hong Kong’s financial secretary announced a plan to distribute HK$10,000 to each permanent resident above the age of 18 in the city amid government forecasts that the economy would contract as much as 1.5 percent this year.

Trading on Colonial Era Names

Wheelock and Wharf were originally separate British colonial-era conglomerates acquired in the 1980s by shipping magnate Yue-kong Pao. At the time of his retirement in 1986, Pao turned over control of his interests in Wheelock and Wharf to Peter Woo, who had married the tycoon’s daughter, Bessie Pao Pui-yung. Now 73, Woo stepped down from Wheelock in 2015 when his son Douglas Woo was appointed chairman, taking the title of senior counsel for himself.

Listed in 2017 after being spun off from Wharf Holdings, Wharf REIC holds an 11.7 million square foot (1.1 million square metre) portfolio worth HK$276 billion. The company’s six assets in Hong Kong include flagship properties Harbour City in Tsim Sha Tsui and Times Square in Causeway Bay.

Wharf Holdings, which has $180 billion in commercial assets across Hong Kong and mainland China, hauled in total revenue of $8 billion last year through rent and sales of its hotels, luxury residential developments – including Mount Nicholson. The company also has income from its logistics properties which are held under its Modern Terminals and Hong Kong Air Cargo Terminals unit.

Buying Up Developments at a Discount

Woo’s buyout offer during the current stock slide comes after Wheelock has pursued new project acquisitions as Hong Kong’s property market cooled off in the past seven months, with the company having secured a pair of sites during that period at values below market expectations.

Just three weeks ago, Wheelock agreed to pay HK$2.725 billion – as well as an undisclosed lump sum reported to be up to HK$3.5 billion – for a residential site in the MTR Corporation’s Lohas Park project in the Tseung Kwan O area. The company won that site at a 12 percent discount from the price per square foot that a consortium of bidders had paid to acquire the previous phase of the New Territories development ten months before.

Six months prior to that purchase, a joint venture invested by Wheelock, K Wah International Holdings and China Overseas Land and Investment agreed to pay HK$12.74 billion to win a tender for the biggest plot of residential land on Hong Kong’s former Kai Tak airport, with that bid also coming in below market expectations.