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Lippo: No change in strategy for OUE

Posted on 11 Mar 2010 | Comments Off

Group will continue to develop, manage prime landmark properties in region

It will be business as usual for Overseas Union Enterprise (OUE), even as Indonesia’s Lippo Group takes sole control of the property firm.

‘There will be no change to OUE’s strategy,’ Lippo told BT yesterday. ‘Leveraging on its hospitality experience, OUE will continue to develop and manage landmark properties in prime locations in Singapore and across the region.

‘Under Lippo’s stewardship, OUE will continue to focus on retail, commercial and residential developments, which will allow the group to achieve sustainable growth over the long term.’

Questions over OUE’s direction surfaced after it underwent a significant ownership change on Tuesday. Its major shareholder Lippo paid $957 million – or $11 per share – to acquire the stake of another major shareholder Usaha Tegas.

This raised Lippo’s direct and indirect interests in OUE to 88.52 per cent from 64.67 per cent. Lippo president Stephen Riady also became OUE’s executive chairman.

Lippo is controlled by the Riady family and Usaha Tegas by Malaysian tycoon Ananda Krishnan. Talk of tension between two of the region’s richest business groups have been making its rounds, as both parties got into a legal battle over a failed pay-TV tie-up in Indonesia.

Last month, Mr Krishnan’s subscription TV group Astro won an award of some US$230 million against Lippo.

Lippo did not say if differences with Mr Krishnan drove it to take over the latter’s stake in OUE. But it shared that the deal came about after Bank of America Merrill Lynch approached both parties ‘with an attractive and compelling proposal’.

Lippo added: ‘We have been in discussions since that time and believe that this transaction makes sense and will benefit all parties.’

It is tapping on internal funds and bank borrowings to raise the $957 million needed.

Yesterday, OUE’s share price dipped slightly by 18 cents or 1.5 per cent to close at $11.80. At this level, the price still exceeds the $11 which Lippo valued each additional share at. It also remains much higher than the closing price of $9.04 last Friday.

Lippo reiterated that the deal will ‘further strengthen its asset base in Singapore’. It has been active in the property market here even on its own, with residential projects such as Holland Collection and Centennia Suites under its belt. Its unit PT Lippo Karawaci is also the sponsor of Lippo-Mapletree Indonesia Retail Trust.

‘Lippo is very comfortable with Singapore and has always looked for opportunities to expand its presence here,’ said Chesterton Suntec International research and consultancy director Colin Tan.

He did not rule out a delisting of OUE – its free float just slightly exceeds 10 per cent. But this might not happen until Lippo ‘contemplates its next course of action,’ he said.

Source : Business Times – 11 Mar 2010

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Posted in Developers

Tagged Golden Concord Asia, Lippo, Lippo Group, Overseas Union Enterprise (OUE)

Lippo buys Krishnan’s OUE stake for $957m

Posted on 10 Mar 2010 | Comments Off

Another chapter closed in troubled alliance; no immediate plans for delisting.

The tenuous alliance between Indonesia’s Riady family and Malaysian tycoon Ananda Krishnan in Overseas Union Enterprise (OUE) has come to an end – at a price of almost $1 billion.

Yesterday, the Riadys’ Lippo Group paid some $957 million to acquire all of Mr Krishnan’s stake – and greater control – in the mainboard-listed property group.

With the deal, Lippo’s direct and indirect interests in OUE rose to 88.52 per cent from 64.67 per cent.

OUE’s free float after the deal will only slightly exceed 10 per cent, putting it at risk of delisting. Nevertheless, Lippo said that it intends to keep the firm listed.

The buyout is the latest display of differences between two of the region’s richest business groups, which have been in legal battle over a failed satellite TV venture in Indonesia. Just last month, Mr Krishnan’s subscription TV group Astro won an award of some US$230 million against Lippo.

The bad blood seemed to have spilled over to the partnership in OUE. Reports noted how the two parties had disagreements over the management of the firm.

Yesterday morning, OUE called for a trading halt in its shares before news of the ownership changes broke. Lippo’s investment unit Golden Concord Asia bought direct and indirect stakes in OUE from Barinal, a unit of Usaha Tegas. Usaha Tegas is Mr Krishnan’s private investment holding firm.

Lippo paid $11 per share for the additional interest. The price represents a premium of 21.7 per cent to OUE’s last closing price of $9.04 last Friday. After trading in OUE resumed later in the afternoon, the counter shot up and closed at $11.98, up $2.94 or 32.5 per cent from Friday.

OUE’s board underwent a reshuffle to reflect the ownership changes. Lippo president Stephen Riady became executive chairman of OUE, a step up from his original role as executive director.

Christopher James Williams, who was OUE’s non-executive chairman, became deputy chairman. At the same time, Barinal’s four nominees to the board resigned, and a new non-independent and non-executive director joined the team.

Lippo, meanwhile, expressed confidence in the growth potential of Singapore’s property market, and said that the deal allowed it to strengthen its asset base here.

‘This transaction is testament to our commitment to Singapore and to being a key player in the vibrant property and hospitality sector here,’ Mr Riady said. ‘OUE will continue to focus on its core business in hospitality, as well as to strengthen its position in the premier retail and commercial space.’

OUE’s portfolio cuts across the hospitality, retail, commercial and residential sectors. It is widely known as the owner of Mandarin Orchard Singapore, the recently revamped Mandarin Gallery and The Grangeford. It is also developing 50 Collyer Quay.

As at December last year, it had some $2.77 billion worth of assets. It posted a net loss of $92.2 million for the full year ended Dec 31, mainly due to fair-value and impairment losses.

OUE was controlled by United Overseas Bank up until 2006, when the latter had to dispose of non-core assets to comply with the Monetary Authority of Singapore’s guidelines. Lippo and Usaha Tegas then joined hands to acquire the property firm for $1.8 billion.

With relationships between the two major shareholders souring, market watchers felt that the latest development could be in OUE’s interests.

According to NUS Business School’s professor of accounting Mak Yuen Teen, having several major shareholders in a company can sometimes be a good thing because they can ‘monitor each other’.

But he also pointed out that the company would not be able to move forward if the major shareholders are not on good terms. In such a case, it would be better to ‘get past hostilities’ and have just one major shareholder.

Another industry insider agreed that the deal could be better for OUE’s development. But he also tried to play down the significance of the buyout. ‘Quite often, people pull out of a company if they don’t share the same vision. . . It’s just about business.’

Source : Business Times – 10 Mar 2010