CDL said the merger represented a further development in the group, and was part of its efforts to have distinct international hotel vehicles at the locations of each of its hotels.

The price paid by King's Hotel for City Hotels represents a 15 per cent discount to the latter's net tangible asset value.

King's Hotel intends to finance at least 90 per cent of the $327.42 million consideration through an issue of 168.38 million new shares at $1.75 each. The new shares represent 200 per cent of its existing share capital.

The issue price represents a 27.7 per cent discount to last Friday's closing price of $2.42 on the Singapore stock exchange.

King's Hotel will also propose a renounceable rights issue of 33.61 million new shares on the basis of two rights shares for every five existing shares at $1.75 each.

The rights issue will raise gross proceeds of about $58.83 million, part of which will be used to pay the remaining 10 per cent of the amount for City Hotels.

CDL will undertake to subscribe for its entitlement of 22.85 million rights shares, to be funded by a placement of about 53.71 million ordinary shares of King's Hotel.

Under the placement, CDL will sell the King's Hotel ordinary shares at $1.75 each to Singapore-registered shareholders on the basis of two placed shares for every existing share they hold.

The placement, representing 21.3 per cent of the enlarged share capital, is intended to prevent a dilution of the interests of minority shareholders of King's Hotel arising from the new issue.

Following the issue and placement, CDL is expected to hold about 68 per cent of the enlarged share capital of King's Hotel.