Acquisition of equity interest in certain property and businesses (“Target Assets”) from Perennial Real Estate Holdings Pte. Ltd. (“PREH”) for a purchase consideration of approximately S$1.56 billion, to be satisfied ultimately by the allotment and issuance of new ordinary shares in St. James (“Proposed Acquisition”) at S$0.0235.
Distribution-in-specie on a pro rata basis the shares of a newly incorporated wholly-owned subsidiary of St James which will hold its existing leisure and entertainment business to existing St. James’ shareholders.
In addition, St. James will also undertake a placement of 52 million new shares to institutional and accredited investors to raise general working capital (“Proposed Placement”) prior to completion of the Proposed Distribution and Proposed Acquisition. Number of shares placed and final issue price will be announced on or prior to 17 March 2014. Now price of placement share is set as S$0.05.
Consolidation of every 50 ordinary shares of St. James into one ordinary share in PREHL, upon the close of the Proposed Acquisition (“Proposed Consolidation”)
St. James Holdings Limited to be renamed as Perennial Real Estate Holdings Limited and transfer from catalist to mainboard.
St. James is proposing a voluntary conditional offer to acquire the remaining Perennial China Retail Trust ("PCRT") units at S$0.70 for each unit, in exchange for 0.5954 new shares of the Company at an issue price of S$1.1756 per share, upon completion of the Proposed Acquisition (“Proposed Offer").
After further consideration, the Board of St James has decided not to proceed with the Proposed Placement and accordingly no new Shares will be placed pursuant to the Proposed Placement.
St James
Accordingly, the Issue Price for the Proposed Acquisition will be adjusted to (i) S$0.0267 for each Consideration Share to be issued prior to the Proposed Share Consolidation; and (ii) S$1.3353 for each Consideration Share to be issued after the Proposed Share Consolidation
Perennial China Retail Trust
Accordingly, the share consideration for each Offer Unit is adjusted as follows: For each Offer Unit: S$0.70, to be satisfied by the issuance of 0.5242 new ordinary shares in the capital of St James at an issue price of S$1.3353 each.
There seems to be a strange disconnect between St James and PCRT share price this morning. Based on the deal, if I did not interpret it wrongly, for every 10,000 PCRT shares one buys, he/she will get 5,242 NEW St James shares, which is equivalent to 262,100 existing St James shares (since there is a share consolidation of 50:1).
In other words, if you pay $6,500 for your PCRT shares, you will get $17,000 worth of St James shares (assuming price of 65ct per PCRT and 6.5ct per St James shares).
This must be a great arbitrage, or I missed some important points in the news releases.
Yup agreed. Buying PCRT seems like a better deal as it a great discount between St James current stock price versus S$0.0267. Perhaps currently the PCRT offer is conditional. Only reaching 50% mark will it turn unconditional and then shareholders of PCRT can participate in this deal. Will need 20 over % to accept the offer. Even if the deal doesnt get through, PCRT will still give some dpu. Based on 3.8c dpu, yield is around 6% to 7%.
Also not clear is after converting PCRT shares to Perennial Real Estate, will Perennial Real Estate gives dividend and comparable to PCRT dpu? PCRT may not be able to sustain the 3.8c dpu for next year as the earnout will be used up for this year dpu.
1. Risk of SGX not approving the deal, or both parties calling off the deal.
2. Risk of St James shares plunging prior to the completion of the deal.
Investors will have to do their own assessment of risk-reward here before taking the plunge. But over the medium term, it would be prudent to stay away from St James shares because if the deal goes through, the share price may fall sharply. Over the short term, for reasons of demand and supply, St James shares may get pushed up (like today) despite the lack of fundamental logic for it.
Current St James share price minus $0.0267 equals the value of the entertainment biz that will be distributed in specie to shareholders? Note that this biz will be unlisted so shareholders have to hope that Dennis Foo will offer to buy it from them.
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