Leading Property Companies Pidemco Land Limited and DBS Land Limited Announce Plans to Merge
Singapore, 12 July, 2000
Singapore, July 12, 2000 Pidemco Land Limited ("Pidemco") and listed DBS Land Limited ("DBSL") announce that they signed a merger agreement today to create the largest listed property company in South East Asia, with total assets of approximately $18 billion and a presence in 31 cities and 15 countries as of 31 December, 1999.
The merger will be implemented pursuant to a scheme of arrangement. Under the scheme, each DBSL ordinary share will be exchanged for 0.928 new Pidemco ordinary shares. The exchange ratio is based on the relative NAV per share of each company and adjusted upwards in favor of DBSL shareholders as a result of negotiations between the parties. Relative NAV was established based on recent property valuations conducted by jointly appointed, independent, international property valuers.
DBSL will become a wholly owned subsidiary of Pidemco. DBSL will be delisted from, and Pidemco will be listed by way of introduction on, the Singapore Exchange ("SGX"). DBSL will propose a separate, similar scheme to the holders of the US$172.5 million redeemable convertible cumulative preference shares to whom Pidemco proposes to issue replacement securities.
DBSL shareholders will each receive a scheme document in due course and be entitled to vote on the merger. The merger, which has been approved by the board of directors of Pidemco and the independent directors of DBSL, is subject to certain closing conditions, including approval of the merger by DBSL's shareholders and the High Court of Singapore and approval by the SGX for the listing of new Pidemco shares. The merger is expected to be completed in the fourth quarter of 2000.
Both DBSL and Pidemco decided to pursue this merger to maximize long-term shareholder value and to achieve critical strategic objectives. (See "Rationale for Merger")
Pidemco's President, Mr. Liew Mun Leong, said: "We are enthusiastic about the prospect of merging DBS Land and Pidemco Land to form a leading property group in the region. Both companies have complementary competencies and bringing them together will create a stronger group that is better equipped to grow internationally. Together we can achieve higher efficiencies, reach out further and offer more value to our customers and our shareholders. It will be a win-win merger for both companies."
Mr. Liew continued: "DBS Land is a top-notch company and we have high regard for its management team. We certainly look forward to working with them to make the proposed merger an unmitigated success."
DBSL's President and Group CEO, Mr. Ed Ng, said: "The proposed merger makes good commercial sense. It is better for our customers because the resulting cost savings will enable us to give more value for their money.
"It is better for our investors because strategic advantages, operational synergies and economies of scale will enable us to deliver higher shareholder value.
"It is also better for all our employees as they will have more exciting opportunities for career development in the enlarged company."
Philip Yeo, the current Pidemco chairman, will serve as Chairman of the merged company. Hsuan Owyang, the current DBSL chairman, will hold the position of Deputy Chairman and Liew Mun Leong, the current Pidemco President, will be named President and Chief Executive Officer. Other positions within the merged company will be announced in due course.
RATIONALE FOR MERGER
DBSL and Pidemco share a common aspiration to be a world-class property company that delivers sustainable shareholder value. This merger is a major step towards achieving this shared vision and should result in significant benefits to both companies including:
a. Enlarged company size; significant scale in core sectors
The merger combines the common and complementary businesses of two companies. The increased size is a significant step towards both companies' vision to become a world-class real estate company where the achievement of critical mass is an essential factor. The merged company, with a combined asset base of $18 billion, will be the largest listed property company in South East Asia. It will be well positioned to expand internationally.
In addition, the revenue base and asset size of each of the core businesses of the merged company will increase significantly, allowing them to operate flexibly to meet different market needs and risks. This increase is expected to create operational efficiencies and better position each individual business to pursue growth opportunities.
In the residential property sector, the merged business will be one of the largest in Singapore with a high quality landbank that will have the capacity to launch 1,500 to 2,000 residential units a year. Australand Holdings Limited, a listed subsidiary, is the largest residential property developer in Australia. The merged commercial investment business will be the largest in Singapore and will comprise $8.1 billion in assets, primarily in office and retail. The merged company's serviced residence business will be the largest in the Asia Pacific with over 6,000 units across 16 cities in 10 countries.
b. Larger market capitalisation
The merged company will have NTA of approximately $7 billion as of 31 December, 1999. The larger market capitalisation will enhance its weighting on the Singapore stock indices and therefore attract stronger investor interest from funds that attempt to mirror these indices and should widen the potential investor base.
Being part of a larger property company should also provide stronger financial capacity as larger listed companies in each regional centre typically experience improved access to debt and equity markets. This should lead to a relatively lower cost of capital in funding new acquisitions, upgrading assets and restructuring existing funding arrangements.
The merged company's enlarged capital base of approximately $7 billion will enable it to compete more effectively for acquisitions with other large property companies. It will also benefit from increased international visibility that will enhance its ability to attract deals and partners.
c . Broader Geographic Presence
The merged company will have a broader geographic base from which to expand to fulfill its vision of becoming an international property company. The merged company will have market presence in 31 cities in 15 countries, including Singapore, Malaysia, China, Australia, New Zealand and the United Kingdom. The geographic diversification of the merged company will also reduce the over-reliance on any single market, tenant, asset or asset class.
d. Operational synergies and economies of scale
The proposed merger and consequent increased size of the merged company would improve operating efficiencies through access to a larger international pool of talent and expertise, development of human resources, the identification and adoption of best practices currently used by each company and increased negotiation and purchasing power. The merged company's management expects to generate estimated annual pre-tax savings of approximately $50 million.
To create a world-class property company which delivers sustainable shareholder value through world-class operations and businesses.
B. Business Strategy
The merged company will continue to be in the businesses of property investment, development and management. The intention is to:
a. Build on sectors where it has competitive advantages and become a sector leader. The key sectors identified are residential, commercial and serviced residences;
b. Develop fee-based businesses such as real estate based financial products, and asset and property management as a second growth engine to augment the property-based businesses within the key sectors;
c. Expand the international presence of core businesses to capitalise on attractive overseas investment opportunities in selected gateway cities which meet strict investment criteria and have favourable economic and demographic characteristics. The merged company intends to localise management and collaborate with local partners;
d. Improve capital structure by strengthening the balance sheet and improving capital productivity through capital turnover, active asset management, off balance sheet financing and fund management;
e. Exploit internet and e-initiatives to e-enable key processes within the merged company, tap new technologies to enhance quality of services and products and leverage off its large asset, customer base and property knowledge to develop property-related e-businesses.
C. Business Structure
The listed company will function as the corporate headquarters, spearhead the growth of the entire group and set its overall direction and strategy. It will also play a key role in developing a talent pool, identifying key investment opportunities, developing new businesses and allocating capital and managing overall risks.
The plan is to grow each key sector into a major business unit with all units held by the merged entity. Each unit will be headed by a Chief Executive Officer with its own management team for greater accountability and management focus.
The proposed structure will provide the different businesses more flexibility to meet the different needs and challenges of each sector. This will contribute to more efficient and effective operations at the group and subsidiary levels.
D. Sector Strategy
The merged company will focus on the real estate industry concentrating primarily on the residential, commercial, and serviced residence sectors. Non-core assets and investments of the merged company will be reviewed and may be divested when appropriate.
In the residential sector, the merged company will capitalise on DBSL's and Pidemco's joint development expertise, established market presence and substantial quality landbank in Singapore, China and Australia to position itself as a leading housing developer and investor in the region. In Singapore alone, the merged company will have eight projects under development and a prime landbank of approximately 4.9 million square feet of potential buildable area. The merged company will promote e-initiatives in the development of quality properties, and control costs through efficient design, prudent landbanking and capitalizing on economies of scale.
The commercial sector will include the merged office, retail and industrial portfolios of Pidemco and DBSL. In the office sector, the merged company will have total assets exceeding $5.6 billion. The merged company will own 38 office properties with 9 million square feet of net lettable area (NLA), of which 28 properties comprising 5.3 million square feet of NLA are located in Singapore. This will make it the largest office owner in Singapore. The overseas properties are located in key gateway cities such as Hong Kong, Shanghai and London.
The merged company will also be the largest retail owner in Singapore and a dominant regional competitor with total assets of approximately $1.9 billion. It will own 23 retail properties containing 2.3 million square feet of NLA and manage another seven retail properties with 2.0 million square feet. These properties are located in 12 cities and six countries.
The merged company will own eight industrial properties with 4.6 million square feet of NLA. The group will seek to shift its industrial portfolio towards value-enhanced usage in line with new economy requirements, such as distribution centres and telecommunications facilities co-location hubs.
The merged company will continue to focus on prime, grade "A" commercial property in gateway cities with strong financial sectors to create value through strong asset enhancement and property management. The merged company will leverage off its existing portfolio to build its network in major metropolitan markets in the region before moving out of Asia. It will also grow its commercial portfolio through judicious acquisition and selective development of properties that are expected to increase the company's net asset value, generate attractive yields and enhance shareholder value. The merged company intends to enhance products and services by exploiting internet technologies.
The serviced residence arm of the merged company, comprising DBSL's stake in The Ascott Limited ("Ascott") and Pidemco's stake in Somerset Holdings Limited ("Somerset"), will be the largest in the Asia Pacific region. Ascott and Somerset own or manage a combined total of over 6,000 quality serviced residences in 16 cities. The merged company will seek to establish its position as the leading provider of dominant global brands in the rapidly growing serviced residence industry.
DBSL and Pidemco jointly own approximately 60 per cent of listed hotel company, Raffles Holdings Limited ("Raffles Holdings"). The merged company intends to review options and support viable growth opportunities for Raffles Holdings.
Property Fund Management
The merged company plans to build up its property fund management capabilities by collaborating with established partners and focusing on product-specific funds in Asia.
Property management services will continue to be provided by PREMAS, a wholly owned subsidiary of Pidemco, and by ESMACO, a subsidiary of DBSL. PREMAS and ESMACO are the two largest property managers in Singapore with expertise in both residential and commercial property management. The plan is to develop a leading regional property and asset management business providing a full range of integrated services both to the merged company and to third-parties.
DBSL holds stakes in listed Parkway Holdings Limited ("Parkway") and VISTA Healthcare Pte Ltd. The merged company intends to exit its healthcare investments through strategic sale when appropriate.
Salomon Smith Barney is acting as financial adviser to both Pidemco and DBSL on the merger, including recommending the exchange ratio.
INDEPENDENT FINANCIAL ADVISER
N M Rothschild & Sons (Singapore) Limited ("Rothschild") is acting as independent financial adviser to the independent directors of DBSL. Rothschild has reviewed the terms of the proposed merger. Based on information made available to Rothschild, Rothschild is of the view that the terms of the proposed merger are fair and reasonable and not prejudicial to the interests of shareholders of DBSL. Having considered the advice of Rothschild and the terms of the proposed merger, the independent directors of DBSL concur with Rothschild's view that the terms of the proposed merger are fair and reasonable and not prejudicial to the interests of DBSL shareholders and recommend that DBS Land shareholders vote in favour of the merger.
Issued by : Pidemco Land Limited and DBS Land Limited
Date : July 12, 2000
Pidemco Land Limited
Pidemco is one of the largest property groups in Singapore with total assets of $8.2 billion as at 31 December, 1999. Pidemco has a significant presence overseas with investments in 24 cities in 12 countries including key gateway cities in the Asia-Pacific region and in the United Kingdom.
As a leading developer, investor and manager, Pidemco? portfolio includes premier residential and commercial properties. Pidemco also has in its portfolio serviced residences and retail developments owned and/or managed by its subsidiary, Somerset Holdings, which is listed on the mainboard of the Singapore Exchange. Regional property and asset management services are provided by Pidemco? wholly owned subsidiary PREMAS International which is one of Singapore? largest residential and commercial property managers. Listed associate Raffles Holdings owns and manages leading hotels in the region.
Pidemco has regional offices in Hong Kong, Shanghai and London. In its drive to excel as a world-class real estate company, Pidemco is committed to developing its people, its systems and in building quality buildings using the most advanced technologies and the latest innovations. In Singapore, it has achieved a reputation for its professional building and management expertise and has ISO 9002 certification for its quality management systems. Pidemco is a subsidiary of the Singapore Technologies Group.
DBS Land Limited
DBSL is a leading property company in Singapore with total assets of $7.5 billion as at 31 December, 1999. It is the second largest property company listed on the main board of the SGX with a market capitalization of $3.5 billion as at 11 July, 2000. Based in Singapore, it has significant operations spanning 11 countries in the Asia Pacific and Europe.
DBSL's core business is in property development in Singapore, Australia, China and Malaysia where it develops mainly residential properties for sale. In addition, DBSL maintains a portfolio of prime office, retail and industrial complexes for rental income. In property-related services, DBSL offers extensive expertise in project management, marketing, valuation, estate and property management.
DBSL owns investments in several listed companies. Raffles Holdings owns, develops and manages a portfolio of deluxe and landmark hotels and resorts under the Raffles, Merchant Court and Raffles Resort brands; the Ascott is a leading developer and manager of serviced residences; Australand is Australia's largest residential property developer; United Malayan Land is a leading residential property developer in Malaysia; and Parkway is a prominent healthcare provider. DBSL also has interests in Hind Hotels International Limited, Sea View Hotel Limited and SC Global Developments Ltd.