ATTRACTIVENESS OF PUBLIC-LISTED PROPERTY COMPANIES AS TAKEOVER TARGETS : A CASE STUDY

Abstract

The takeover bid on Singapore Land by United Industrial Corporations had all the elements of high drama. The cast of characters were some of the most prominent businessmen in Singapore. In U I C 's corner was the acquisitive and aggressive Oei Hong Leong whilst Singapore Land had the experienced and respected S.P Tao. At stake, apart from the ego of the parties involved, was one of the largest property holding companies listed on the SES and for which UIC was willing to pay $2.6 billion. Real estate has long been a considered a mainstay of wealth by Singaporeans. The fact that land is an extremely scarce resource in this island state and given the success of its economy, it is thus not surprising that capital value have appreciated substantially over the years. This probably explains why cash-flush Japanese have been willing to pay hefty premium to acquire prime real estate in Singapore. An alternative method for investing in Singapore's real estate market would be to acquire the shares of property holding companies. Taken to its extreme, this could involve an acquisition of the company in the case of public listed companies. One peculiarity of public listed companies is that its value is subject to the vagaries of the stockmarket and can sometimes result in undervaluation by the market. However, an acquisition decision involves more than just value-price disparity. This study sets out a framework for analysing public listed property companies with the aim of establishing their takeover attractiveness and thereby determining the probability that they will be taken over. Five companies were analysed ; Singland, Citydev, DBS Land, Malayan Credit and Parkway. It was found that Singland and Parkway have medium takeover probability. Citydev and DBS Land, however, have low takeover probability whilst Malayan Credit has a strong takeover probability.