(Reuters) - Singapore’s City Developments (CTDM.SI) (CDL) has made an offer to buy the remaining shares of Millennium & Copthorne Hotels (MLC.L) (M&C) it does not own, in a deal that values the hotels group at about 1.8 billion pounds ($2.4 billion).
The move, which amounts to purchasing a 34.8 percent stake for 624.3 million pounds, would bring the operator of the Millennium, Grand Millennium, Copthorne and Kingsgate hotels back into the fold of Singaporean billionaire Kwek Leng Beng’s property empire.
London-listed M&C’s shares shot up 21.5 percent on news of the deal, after CDL said M&C shareholders would get 545 pence per share in cash and be paid a special dividend of 7.5 pence per share.
The entire offer represented a premium of about 21.4 percent to M&C’s closing share price on Friday.
M&C independent directors said in a joint statement that they considered the financial terms of the deal to be fair and reasonable, although they still need to officially approve the sale.
M&C has 130 hotels around the world, and has focused on building its footprint in major cities such as London, New York and Singapore. CDL said it would maintain M&C’s business model and did not intend to sell any of M&C’s hotels in London or New York.
The pound's slide GBP= since Britain voted last year to leave the European Union has made some British companies more attractive to overseas suitors, including in the property sector. Chinese buyers have been the most active purchasers in the sector with C C Land (1224.HK), LKK Health and R&F Properties (2777.HK) picking up trophy assets.
CDL is part of Kwek Leng Beng’s Hong Leong Group and indirectly held shares representing a 65.2 percent stake in M&C as of Oct. 9.
CDL reduced its stake and listed M&C on the London Stock Exchange in 1996. In the first half of this year, the hotel group accounted for 49 percent of CDL’s revenue.
“As such, the offer helps to mitigate some of the discount for M&C imputed in CDL’s share price,” Jefferies analyst Krishna Guha said in a note, adding that CDL’s management will be able to improve operating metrics as trading conditions improve.
Higher costs, a string of attacks across Europe and competition from the likes of Airbnb have challenged trading at European hoteliers, including M&C.
The company has in response stalled certain projects and in August reported stronger demand at its hotels in London and Singapore.
Deutsche Bank and HSBC Bank acted as financial advisers to CDL, while Credit Suisse acted on behalf of M&C’s independent directors.
It was the second large deal announced by CDL in as many weeks. Last week, CDL and its joint venture partner said they will buy a freehold residential site on Singapore’s east coast for S$906.7 million ($667 million), adding to a property deal frenzy in the city state this year.
Reporting by Esha Vaish in Bengaluru and Aradhana Aravindan in Singapore; Editing by Louise Heavens and Susan Fenton