Published February 4, 2009

Bid price for UIC factors in market conditions: UOL

Analysts see explanation as defence of poor price offer

By JAMIE LEE

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IN what analysts see as a defence of its low offer price for United Industrial Corp (UIC), UOL Group said yesterday that its bid price of $1.20 per share - which values UIC at about $1.65 billion - took into account the poor market and economic outlook.

UOL Group - controlled by United Overseas Bank (UOB) chairman Wee Cho Yaw - had last month made a $1.15 billion offer for the remaining stake of just under 70 per cent in UIC that it does not already own. The offer came after the holding of UOL and relevant parties crossed the 30 per cent trigger level.

The offer, priced then at 9.1 per cent higher than UIC's last transacted price of $1.10 per share, was seen as a technical one by analysts. They said that the price was unattractive and that shareholders - including Filipino tycoon John Gokongwei Jr, the largest 35 per cent stakeholder who in 2005 had tried to take over UIC - were unlikely to accept the offer.

In its offer document yesterday, UOL Group said: 'The offeror considered various factors including the continuing volatility in global credit and capital markets, the difficult economic conditions, and a deteriorating property market in Singapore.'

The document cited the sullen economic growth estimates that the government had adjusted 'on more than one occasion' and noted reports of declining property sales and pricing that signal a fall in property values this year.

Citing the 'long-term prospects' of UIC, UOL said that it would look into the business of UIC (including its fixed assets) with a view to enhancing its operations. UIC's assets include SingLand, the listed crown jewel in which it has a 70 per cent stake.

'Depending on the outcome of the offer...UOL intends to monitor and review the operational performance of UIC and identify any potential areas for operational and strategic enhancement,' UOL said. 'Such enhancements include possible streamlining of any assets or operations of both the UOL Group or the UIC Group.'

Through SingLand, UIC owns office buildings such as Singapore Land Tower, SGX Centre, Clifford Centre and The Gateway in the Central Business District area.

It also owns about half of the Marina Square shopping mall and the Pan Pacific hotel.

UOL said that if it gained control of more than half of UIC, it would offer to buy SingLand at $3.57 per share.

Since the announcement of the offer, changes in shareholdings have been small, regulatory filings showed.

As at Feb 2, Morgan Stanley has pared its stake to 11.01 per cent. Last month, UOL upped its stake to 30.29 per cent, while Mr Gokongwei - who analysts say is unlikely to make a counter-bid - mildly raised his stake to 35.18 per cent at $1.22 per share on Jan 22.

UIC lost 0.8 per cent to end at $1.22 yesterday, while UOL finished up 3.7 per cent at $1.96. SingLand closed unchanged at $3.27.