Billionaire Peter Woo to take Wheelock private, handing HK$16.5 billion value windfall to shareholders
- Wheelock to distribute its stakes in Wharf Holdings Wharf REIC to shareholders, according to its stock exchange filing
- Peter Woo to take Wheelock private via a HK$12 per share cash offer after stake distribution
Hong Kong billionaire Peter Woo Kwong-ching is taking his flagship Wheelock & Co property empire private through a two-step transaction, handing investors a HK$16.5 billion (US$2.1 billion) windfall. Its shares jumped to an all-time high.
Wheelock plans to distribute its equity holdings in the two Wharf entities with a combined market value of HK$123.7 billion to its shareholders, based on their stock prices before trading was halted on Monday for the announcement. That exceeds the HK$97 billion market value of Wheelock itself. The tycoon will follow up with a take-private offer after the distribution.
The move comes as Woo seeks to untangle the interlocking companies to realise the value of their underlying assets, just as the Hong Kong real estate industry is going through its worst slump in decades amid a recession. Cracks in the retail and hotel sectors are widening after months of social unrest and the coronavirus outbreak, while the economy sinks deeper after contracting in 2019 for the first time since the 2009 financial crisis.
“It’s a win-win-win situation for all three businesses, given the current situation that the global economy finds itself,” said Justin Tang, head of Asian research at broker dealer United First Partners, in a note about the privatisation before the announcement. “Once this coronavirus [outbreak] clears, the Hong Kong protests might start again, so minority investors may think this [is] a good bail out deal.”
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In the first step, Wheelock has proposed to distribute its 70.7 per cent stake in Wharf (Holdings) and 66.5 per cent holding in Wharf Real Estate Investment Company to its shareholders, according to its stock exchange filing on Thursday.
In the second step, the 73-year old tycoon will make a cash offer of HK$12 each to some Wheelock shareholders to take the company off the stock exchange. Woo’s Admiral Power Holdings will finance the HK$8.15 billion privatisation bid with cash and debt, the company said.
The Wharf equity stakes and the cash offer will give Wheelock shareholders HK$16.5 billion, or HK$24.65 per share, in additional value above the company’s current market capitalisation, the company said in the filing.
The privatisation “aims to unlock shareholder value through the elimination of the historical holding-company discount of the company’s stake in Wharf REIC and Wharf,” Wheelock said in the filing.
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It can also “deliver higher dividend income from Wharf REIC shares and Wharf shares in addition to return on cash” and enhanced choice for Wheelock shareholders through separate and direct ownership of Wharf entities with higher trading liquidity, the company said.
Woo is the city’s eighth richest with a current net worth of about US$14.3 billion according to Forbes. He and his family trust and other parties in concert will own 100 per cent of Wheelock after the proposals. The billionaire retired as chairman of Wheelock and Wharf in May 2015.
Wharf REIC’s major assets include the Harbour City in Tsim Sha Tsui, Times Square in Causeway Bay, and the Wheelock House, Crawford House and The Murray in Central. Wharf (Holdings) holds the family’s interest in about 3.8 million sq m of land bank in Hong Kong and mainland China, as well as its hotels and logistics units.
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Hong Kong’s property tycoons came under the spotlight for much of 2019, whose stranglehold on the industry drew ire and partly blamed for Hong Kong’s housing crisis during the social unrest. The slump in tourism and retail sales have also prompted tenants to push landlords, Wharf and its peers, to cut rents in malls across the city to survive the onslaught.
Wheelock currently holds 70.7 per cent of Wharf (Holdings) and 66.5 per cent of Wharf REIC. The company will distribute one Wharf and one Wharf REIC share for every one share in the company.
“The number on the surface is large, but in fact the share prices of the other two companies are much lower,” said Raymond Cheng, a property analyst at CGS-CIMB Securities. “So there’s a high chance for the major shareholder to succeed in the privatisation.”
Wheelock shares jumped to as high as HK$71.00 in Hong Kong, a record, after trading resumed on Thursday. The stock ended the day at HK$66.00 for a 40 per cent gain.
--- with additional reporting from Bloomberg
