City Developments Limited (CDL) has announced its intention to acquire all shares in New Zealand-listed Millennium & Copthorne Hotels New Zealand Limited (MCK) for NZ$2.25 ($1.72) per share. This will be done through CDL’s wholly-owned subsidiary, CDL Hotels Holdings New Zealand Limited (CDLHH NZ).
The move will simplify the ownership structure of CDL’s New Zealand entities as MCK currently owns, leases or has under franchise 18 hotels in New Zealand. In addition, MCK has interests in properties in Australia through its Kingsgate Group subsidiaries and a majority stake in CDL Investments New Zealand Limited.
As of Jan 17, CDLHH NZ holds 80.02 million shares in MCK, representing a 75.86% stake. If CDLHH NZ reaches the threshold to invoke the compulsory acquisition provisions of the New Zealand takeovers code, it may choose to acquire all outstanding shares in MCK. It may also redeem the non-voting redeemable preference shares issued by MCK.
However, as the non-voting redeemable preference shares are not included in the offer, CDLHH NZ has announced its willingness to acquire these shares at NZ$1.70 or approximately $1.30 each. The purchases will be made through its broker, Craigs Investment Partners, on the Main Board of the New Zealand Stock Exchange (NZX). As of Jan 17, CDLHH NZ holds 91.34% of MCK’s non-voting redeemable preference shares.
If the offer is fully accepted, CDLHH NZ will pay a total consideration of NZ$57.29 million. It also expects to pay around NZ$7.77 million for all of the redeemable preference shares it seeks to acquire.
The offer price for MCK’s shares and redeemable preference shares has taken into account the prevailing and historical market prices, as well as the industry and business environment in which MCK operates. As of June 30, 2024, MCK had a net asset value (NAV) of NZ$532.02 million and net tangible asset value (NTA) of the same amount. The NAV and NTA attributable to the MCK shares subject to the offer are around NZ$85.62 million each.
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The offer is conditional on CDLHH NZ receiving 90% or more of the voting rights in MCK by May 2, 5pm. CDLHH NZ will also need to obtain consent under the Overseas Investment Act 2005 of New Zealand and the Overseas Investment Regulations 2005 of New Zealand to own and control all shares in MCK.
The implementation and payment of the offer is not expected to have a material impact on CDL’s earnings per share (EPS) or net tangible assets (NTA) for the financial year 2025 ending Dec 31.