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CapitaMalls Asia shares surge after S$3b buyout offer by parent company

SINGAPORE — Shares of mall operator CapitaMalls Asia (CMA) surged more than a fifth yesterday after parent company CapitaLand made an offer to buy out the rest of the unit to consolidate business operations and boost earnings.

Shares in CMA, whose assets include ION Orchard and Plaza Singapura, rose to a high of S$2.21 each when trading resumed yesterday, after Monday’s suspension for the buyout announcement. That reflected a 22.4 per cent intraday gain — the biggest since it went public in November 2009 — before the shares closed at S$2.19, up 21.3 per cent from the previous close.

Meanwhile, CapitaLand’s shares rose 6.8 per cent to a high of S$3.12 each before closing at S$3.11, reflecting a 6.5 per cent gain.

CMA and CapitaLand were the most actively traded stocks by value on the Singapore Exchange (SGX) yesterday. About 185.2 million CMA shares worth S$405.9 million and 50.5 million CapitaLand shares worth S$155.6 million changed hands.

Most analysts viewed CapitaLand’s S$3.06 billion offer positively: Singapore’s largest listed property developer currently owns 65.3 per cent of CMA and intends to buy the remaining shares at S$2.22 a share, with the intention of taking it private.

Barclays analyst Tricia Song said the offer is a “win-win” for both companies and an opportunity for CMA’s minority stakeholders to “realise value” as the shares have been trading at an average of S$1.83 since its initial public offering (IPO).

“Although it has been only three-and-a-half years since the spin-off of CMA, CapitaLand is offering to privatise it at a price slightly higher than its IPO price. Regaining full control of CMA should give CapitaLand more flexibility, including the ability to streamline its organisational structure,” she said.

Maybank analyst Wilson Liew also favoured the buyout, calling it a smart move. “If the privatisation is successfully executed, it would be one of Capita-Land’s most astute acquisitions, allowing it to leverage CMA’s retail expertise while keeping it as a key earnings driver … We believe streamlining of the business will be positive for Capita-Land, as it will be more synergistic to pursue integrated developments under a combined entity, rather than a consortium of related listed entities.”

Mr Liew added that the transaction would allow CapitaLand to make good use of proceeds raised from the sale last month of its stake in Australand, which amounted to nearly S$1 billion.

CapitaLand President and Group Chief Executive Lim Ming Yan said on Monday that integrating CMA into the group’s operations is a strategic move to allow the firm to react to changing market conditions more quickly and be more nimble in taking up integrated development opportunities.

The deal, if successful, will raise the company’s earnings per share for FY2013 by about 21.5 per cent and improve return on equity as at end-December from 5.4 per cent to about 6.7 per cent on a pro forma basis.

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