Shareholders of PCPD are being offered HK$2.85 per share in cash. The price represents a premium of 26% over the closing price on February 6, the last full trading day before the shares were suspended. But the shares have been trading down in tandem with the markets, and the offer price is at a premium of only 15% to the closing price based on a four-month average.
The price represents a 2.5% premium to the audited net asset value (NAV) as at December 31, 2006, and a discount of 5.9% to the unaudited NAV at June 30, 2007, suggesting the value of PCPDÆs real estate portfolio has grown but that investors are not rewarding the company by pushing up its traded share price.
PCCW owns 61.5% of PCPD. The remaining minority shareholders who own 38.5% of the company are now being offered an exit by way of a scheme of arrangement. The scheme is expected to come into effect by August, subject to the fulfilment of certain conditions, including a shareholder vote. Citi is advising PCCW and Picville Investments on the deal.
PCPD is a developer and manager of premium property and infrastructure projects. It holds the development rights for the Cyberport project, which is owned by the Government of Hong Kong and which includes the Bel-Air residential development. PCPD intends to use the Bel-Air brand for further premium developments in Hong Kong, China and elsewhere in the Asia-Pacific region.
PCPD also holds, jointly with PCCW, the right to redevelop PCCW-owned telephone exchange sites into residential or commercial properties. The first such unit, which will be the prototype, is under development in Hong Kong's Sheung Wan district. It will comprise 150 boutique apartments and is expected to be completed by 2009. This particular business could become a significant revenue-spinner for PCPD, as telephone sites used to be situated in prime locations.
PCPD is also developing a residential project in Beijing near Pacific Century Place.
ôPCPD will be able to concentrate on property projects that create value over a longer term and will not be distracted and pressurised to deliver short-term performance,ö is one of the reasons cited by PCCW for pursuing a delisting. PCCW also noted that ôthe share price of PCPD has underperformed both the Hang Seng Index and the Hang Seng Property Indexö.
Most property analysts are bullish on the prospects for Hong Kong property and Pokfulam specifically, where Bel-Air is located, is expected to witness significant appreciation.
The previous attempt by Richard Li to delist one of his companies was in 2006 when TPG Newbridge attempted to buy out the 25% held by minority shareholders in Singapore-listed Pacific Century Regional Developments through a tender offer. That deal was aborted when a well-publicised saga began with respect to one of PCRDÆs underlying assets, PCCW itself. All involved must be hoping that this time around the results will be different.
PCCW gained half a percent yesterday to close at HK$4.45. PCPD resumed trading after a three-day suspension and gained 25% to close at HK$2.83. It is now just two cents shy of the offer price.
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