Published January 15, 2009

Wee's timing may stymie Gokongwei

By SIOW LI SEN

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VETERAN banker Wee Cho Yaw yesterday launched 2009's first local corporate takeover bid and, in doing so, provided much excitement to an otherwise dull market.

The gossip mill went into overdrive as market observers vied to give their two cents' worth on Mr Wee's $1.55 billion takeover offer for United Industrial Corp (UIC) and its unit Singapore Land by the UOL group.

His fans pointed to Mr Wee's perfect or lucky timing in managing to put in the offer at a low price of $1.20 per share while his rival John Gokongwei Jr is stuck at a whopping $2.85 a share. This means the Filipino tycoon has to fork out almost $3 billion if he intends to mount a competitive bid.

Takeover rules dictate that the offer has to be at the highest price that has been paid by a bidder in the last six months.

The highest price Mr Gokongwei paid for UIC in the last six months was on Aug 14 last year, when he bought 48,000 shares at $2.85 a piece. Mr Wee, on the other hand, while being among the most active buyers in 2008, managed to pay not more than $1.20 a share during that six-month period.

Mr Wee, 80, and Mr Gokongwei, 81, chairman and deputy chairman of UIC respectively, have been nipping at each other's heels for control of the property company for some 10 years now.

The tussle for UIC and its prized asset SingLand, a major office landlord with some of the most valuable real estate in Raffles Place and Shenton Way, began in 1999 when Mr Gokongwei first bought into the company after he paid $310 million to take over a stake from Indonesian businessman Liem Sioe Liong. It was seen as a rude shock to Mr Wee who at the time controlled UIC through United Overseas Bank (UOB), which owned 23 per cent. Mr Wee is UOB chairman.

Through JG Summit Holdings, Mr Gokongwei then continued buying UIC shares and now owns 34.8 per cent, ahead of UOL's 30.2 per cent.

In late 2005, Mr Gokongwei made a failed $1.09 a share bid for UIC after he amassed 30 per cent - triggering a mandatory takeover bid. But it was never seen as a serious effort because the offer price was at a discount to its then last-traded price.

With two major shareholders, considered as canny and shrewd as they come, and who probably match each other in sniffing out the best deals, UIC minorities who had hoped for a windfall from a takeover tussle have waited in vain.

Mr Wee's latest move, while panned by some analysts as a 'technical offer' - not serious and likely to receive the same fate as the 2005 failed bid - is taking place in quite a different climate.

The world is in a very bad recession and much wealth has been destroyed. Investment bankers on UOL's behalf rightly argue that the bid is sure money, not to be scorned in these uncertain times.

Mr Wee, who some have accused of trying to get UIC on the cheap, is just doing what any buyer would do: pay as little as he can get away with. And if he doesn't succeed, he can then continue to amass more UIC shares - which some think is his game plan.

UIC minorities are unlikely to see a competitive bid from Mr Gokongwei, who (while personally very wealthy) is not in the same league as Mr Wee, who is worth billions.

Not that Mr Gokongwei is short of cash. He is said to have pocketed some $233 million for his almost 30 per cent share of Leedon Heights, which was sold for $835 million in 2007 to Guoco- Land. According to a Forbes ranking last October, Mr Gokongwei was worth US$680 million. Market capitalisation of JG Summit is S$430 million and it had a debt net of cash of S$2.6 billion as at end-September 2008.

So what should UIC minorities do? They can always dream that a third party might jump into the fray though tight credit conditions will shrink the possible number of contenders.

Or they can continue to hold on to UIC shares and ride out the recession.

After all, Mr Wee's numerous fans have always done not too badly by hanging on to his coattails. In such times, they can take comfort in knowing that UIC is a valuable asset, albeit battered.