Guoco Group shares jump 30 per cent on privatisation

Malaysia's Hong Leong offers to pay HK$8.25 billion - or HK$88 per share - to take its HK-listed investment holding company private

PUBLISHED : Thursday, 13 December, 2012, 12:00am
UPDATED : Thursday, 13 December, 2012, 5:01am

Guoco Group's share price jumped 30.6 per cent to HK$92.05 yesterday, the highest level in over 15 months, after the Hong Kong-listed firm announced its privatisation.

Trading was heavy, with 4.49 million shares changing hands.

Hong Leong, a Malaysian company, offered to pay HK$8.25 billion, or HK$88 in cash per share, to take the firm private, Guoco announced yesterday. The price is at a 24.8 per cent premium over Guoco's share price of HK$70.50 before it was suspended on December 4, and values the firm at HK$28.96 billion. This is the second-biggest privatisation of a Hong Kong-listed firm since 2000, behind the US$1.7 billion privatisation of Citic International Financial in 2008, according to Dealogic.

Malaysian tycoon Quek Leng Chan is the chairman of both Hong Leong and Guoco. Quek owns 74.85 per cent of Guoco, according to the Hong Kong stock exchange website. He also owns 49.27 per cent of Hong Leong, a holding company for firms engaged in financial services, manufacturing, distribution, hospitality, leisure and investment, Guoco said.

"The privatisation of Guoco will simplify the shareholding structure of Guoco and improve corporate efficiency," it said. "Full ownership of Guoco by Hong Leong will facilitate integration between Hong Leong and Guoco, and will provide Hong Leong [with] greater flexibility to support the future business development of Guoco.

"The privatisation is also expected to lead to cost savings, allowing Guoco to solely focus on business operations."

One analyst said: "By going private, Quek is buying the company at a discount to NAV [net asset value]. They want to privatise the company [because it] is cash rich. They don't need to go to the market to raise funds."

Unlike most companies, which have much of their NAV in illiquid assets, Guoco has nearly half of its NAV in cash and securities, according to a JP Morgan report.

The company has four core businesses: investment, property, leisure and financial services. Guoco owns a majority stake in GuocoLand and GuocoLeisure, as well as minority stakes in Bank of East Asia, Hong Leong Financial and Pepsi-Cola Products Philippines. As of June 30, Guoco had HK$8.8 billion of cash, but this is nearly half of its cash a year ago, according to its 2012 annual report.

For the fiscal year to June 30, Guoco suffered a net loss of HK$1.29 billion, its only loss in a decade, while turnover plunged 43 per cent to HK$21.49 billion.

In recent years, Guoco had behaved like an investment fund, investing in the IPOs of companies such as AIA and Wynn; hence it made little difference whether Guoco remained a listed company or not, the analyst said.

Additional reporting by Ray Chan