STRAITS TRADING CO.


 


FEUDING DYNASTIC WEALTH

Lees withdraw offer for Straits Trading  
They are accepting Tan family's $6.70 a share offer, citing volatile market conditions

The protracted battle for The Straits Trading Company (STC) has come to an abrupt end with OCBC Bank's founding Lee family suddenly withdrawing its offer for the mainboard company and accepting the $6.70 per share competing offer from the Tan family's The Cairns.

In an announcement released yesterday, the Lee family vehicle Knowledge Two Investment Pte Ltd said that it was 'withdrawing its offer with immediate effect' and citing 'volatile market conditions' among other things.

'Any acceptances of the offer prior to or after the date of this announcement will be deemed not to have been made,' it added.

In its reasons for the withdrawal, Knowledge Two Investment noted that in response to its offers of $5.76 and $6.55 per share on January 24 and February 14 respectively, The Cairns had increased its offer price by $1 per share or 17.5 per cent from its original offer price of $5.70 per share.

'This has increased total STC shareholder value by approximately $326 million,' the statement added. 'Taking into account the foregoing as well as the current volatile market conditions, the offeror and the Lee family companies holding in aggregate approximately 7.1 per cent of the total number of issued shares, have decided to realise their investments in STC and accept the Cairns offer at $6.70 per share.'

This effectively ends a battle which saw two of Singapore's most famous corporate families - the Lees and the Tans, which have been linked for decades through OCBC Bank - on opposite sides in a contest for one of Singapore's oldest listed companies.

It began on Jan 6 when the Tan family - led by Ms Chew Gek Khim, the grand daughter of the late OCBC chairman Tan Chin Tuan - made an offer of $5.70 per share for Straits Trading.

Then on Jan 24, the Lee family made a counterbid of $5.76 per share. The Tans - who at the time held about 22 per cent - swiftly responded on Jan 28 by raising their offer to $6.50 per share.

The Lees then came back with a second counter offer of $6.55, which the Tans matched and upped at $6.70 per share.

Caught in the middle of it all were OCBC Bank, which owns 6.21 per cent in Straits Trading, and insurance giant Great Eastern Holdings which has 19.92 per cent - second only to the Tan family's current stake of about 26 per cent.

Though the Lee family has a relatively small stake in Straits Trading - much smaller than the Tans - it is a key shareholder in both OCBC and Great Eastern.

OCBC last month rejected the takeover offers for its shares in Straits Trading, saying it could extract greater value for itself by staying put and adopting a more proactive role in the company. The bank also noted that Straits Trading has a cash surplus of $347 million and a real estate portfolio worth at least $1.33 billion. It also said it would seek board representation at Straits Trading as well as request the board to appoint a financial adviser to study ways to unlock value and enhance shareholders' value.

Aberdeen Asset Management, which owns about 2.5 per cent of Straits Trading, said last week that it would choose the option that would realise the maximum value in Straits Trading.

Great Eastern has remained mum so far.

Not surprisingly, the battle between the two famous families has enthralled corporate Singapore, and fanned much speculation as to why things have come to a head over the tin smelter.

One theory has to do with OCBC's recent sale of its stakes in companies like Robinson and Raffles Hotel.

There is speculation that the Tan family - especially Ms Chew - is unhappy with the moves, which could be seen to be unwinding the legacy that her grandfather built up.

OCBC's stake sales have been driven by changes where financial regulators hold banks back from having significant non-banking businesses.

But the Tan family could be worried that any decreasing involvement of the Lees in the bank could speed up the divestment process. Although former OCBC chairman Lee Seng Wee's son Tih Shih, 44, sits on the OCBC board, none of the third generation of the Lees is as closely involved in the banking business as previously.

The fear amongst the Tans could be that as the Lees exit the business and OCBC sells its non-bank assets, they would have to deal with less-than-friendly majority owners in these companies where they still hold significant stakes.      - 2008 March 3     BUSINESS TIMES

Lees take on Tans for $2b crown jewel 
Two families, linked by history, vie for Straits Trading Co as Lees make a counter-bid

Two illustrious local business families, whose ties go way back, are pitted against each other in a bid to wrest control of one of the island's oldest outfits: the Straits Trading Company (STC).

Barely a fortnight after the family of the late banker Tan Chin Tuan made a general offer through The Cairns, a subsidiary of their holding company Tecity, the Lee family has come back with a slightly better counter-offer for the property and tin smelting company. The Lees, whose group of companies are the single largest shareholders in Straits Trading, have bid $5.76 a share compared to Tecity's $5.70. Yesterday, Straits Trading closed unchanged at $5.71, giving it a market value of $2 billion.

It sets the stage for an intriguing tussle between the Lee family and the family of their former employee Tan Chin Tuan, who made his fortune working at OCBC Bank, in which the Lees are the largest shareholders.

Mr Tan spent almost half-a-century with OCBC, going on to become its managing director and chairman. He was both its youngest and oldest managing director and credited as the man who made it one of the best capitalised banks in the world. He was also chairman of Straits Trading. But while he was the empire builder, the Lees owned a large part of that empire.

The late Lee Kong Chian, patriarch and philanthropist, managed OCBC from 1938 to 1964, only to hand over the reins to Mr Tan from 1964 to 1983.

The two families are now trying to take control of the company from which Mr Tan retired as chairman only in 1992, at the age of 84. Straits Trading has interests in property, hotels and one of the world's largest tin smelters.

The Lee family's offer was triggered off after they recently bought more than one per cent of STC's shares in the open market, through Knowledge Two Investment Pte Ltd, a wholly-owned subsidiary of Lee Latex, founded by Mr Lee Kong Chian. The offer extends to all shares, including those of the OCBC and Great Eastern Life groups, other than those owned by the Lee family and their companies.

The Knowledge offer price is 16 per cent more than the last traded price before Tecity's offer, but only 0.9 per cent over yesterday closing price of $5.71 a share. It is 6.2 per cent over the volume-weighted average price of $5.43 over the last month.

It also represents a premium of 13.6 per cent over the unaudited net asset value per share of $5.07 as at the end of last September and 45.5 per cent higher than the audited NAV of $3.96 per share as at end- 2006. But many observers feel the assets are grossly undervalued, especially with prime properties like The Straits Trading Building in Raffles Place and Specialist Centre in Orchard Road, being redeveloped. It also owns and/or manages a group of about 20 hotels in the Asia-Pacific region, including Australasia under the Rendezvous and The Marques brands.

As at July 24, 2007, Knowledge and its concert parties held 105.49 million STC shares or about 32.37 per cent of the target company's outstanding shares. Between that date and yesterday, they acquired another 3.37 million shares or about 1.03 per cent of STC's outstanding shares.

The bulk of the concert parties' shares - just under 20 per cent of STC - are owned by the Great Eastern Life group of companies. The Lee family and their companies own 6.23 per cent while OCBC Bank and its subsidiaries own the rest.

The Lees, like the Tans, want to acquire their shares free from all claims and encumbrances with the right to all dividends and other distributions, including those to be made for the financial year ended Dec 31, 2007.

Knowledge was incorporated in October 2000 and has a paid-up capital of $20 million while Lee Latex incorporated in 1947 has a paid-up capital of $30 million. The directors of Lee Latex are Lee Seng Wee, Lee Seng Gee, Lee Seng Tee, Lee Yuen-Shih, Lee Han-Shih (alternate to Lee Seng Gee), Lee Shih Hua (alternate to Lee Seng Tee) and Huang Thiay Sherng.

STC earned over $300 million in net profit for the nine months ended September 2007, on revenue of $727 million. Net profit more than tripled over the corresponding period last year, helped mainly by fair value surpluses amounting to over $220 million in the second quarter, due to revaluation of properties in Malaysia. For the third quarter of 2007, earnings were a more modest $9.8 million, on revenue of nearly $270 million.

When contacted, Tecity said they had no comment on the Lees' offer at the moment.  - 2008 January 22   SINGAPORE BUSINESS TIMES

Straits Trading bidding war will be test for OCBC

The illustrious Tan and Lee families are the ones holding court in the current bidding war over The Straits Trading Company. But it is a seemingly silent player in the entire saga that may well hold the key to the eventual outcome: OCBC Bank.

The bank is in a delicate position in this takeover tussle, being both a substantial shareholder of Straits Trading and a company in which the Lee family has a controlling interest.

This battle between the Tans and the Lees will be a test of OCBC's independence. The bank will need to balance its duty to its shareholders with its ties with the Lee family.

OCBC and the Lee family

Thus far, little thought and attention have been devoted to the role OCBC will play in this saga. The bank is simply one of many shareholders of Straits Trading - a Singapore-listed company with interests in property, hotels and tin smelting.

But unlike many of the other shareholders, OCBC is closely linked to one of the two parties fighting to take over Straits Trading.

The bank was founded by the late patriarch and philanthropist, Lee Kong Chian, who also managed OCBC from 1938 to 1964. And, to this date - while the bank is no longer a family-owned business but a publicly traded entity - OCBC continues to be substantially owned by the Lee family.

The Lees, through their various vehicles and subsidiaries, are believed to own about a quarter of OCBC and are its single largest shareholder.

OCBC was managed for a substantial portion of its history by the late Tan Chin Tuan. Mr Tan was OCBC's managing director and chairman from 1964 to 1983. And the Tan family, through its vehicle Tecity, retains a small stake in the bank. Still, any residual relationship OCBC has with the Tan family pales in comparison to the ties it has with the Lee family.

And it is this perceived imbalance - and OCBC's status as a listed company in its own right - that has put it in a very delicate position, with respect to the ongoing bidding war for Straits Trading.

OCBC's pivotal role

Tecity's chief, Chew Gek Khim - granddaughter of the late Mr Tan - has thrown the spotlight on OCBC's plight when her family raised its bid for Straits Trading on Monday to $6.50 a share, from $5.70 previously.

Along with the revised offer, she announced to the public that she had sent offer letters to OCBC and the bank's insurance arm, Great Eastern Holdings (GEH) - which own 6.21 per cent and 19.92 per cent of Straits Trading respectively.

She announced that if OCBC and GEH accept Tecity's offer, the Tan family - which now owns 23.60 per cent of Straits Trading - would end up owning 49.73 per cent of the offer target.

Her move drew the public's attention to the pivotal role that OCBC will play in this saga, and observers will now be watching to see how the bank will respond to the competing bids for its stake in Straits Trading.

Essentially, OCBC only has one of three choices to make: sell its stake to the Lees; sell its stake to the Tans; keep its stake.

The circumstances in which it makes this choice will be closely observed. At this point, the Tan family's offer for Straits Trading at $6.50 a share is substantially higher than the Lee family's offer of $5.76. Selling to the highest bidder is a commercial decision that most investors understand, so shareholders are unlikely to take OCBC to task if it decides to sell its stake to the Tans.

However, if OCBC chooses to either keep its stake or sell it to the Lees, it will have to justify its decision. If the bank retains its stake, shareholders will want to know if it believes that an offer of $6.50 a share still grossly undervalues Straits Trading.

And, if it decides to sell its stake to the Lees, whose offer is $0.74 a share less than the Tans', it will really have to come up with good reasons to satisfy its shareholders.

The picture is different if the Lees decide to counter-offer with a higher bid. Any decision by OCBC to sell its Straits Trading stake to its controlling Lee family would then be seen more as a commercial decision. And shareholders would more likely question any decision on the part of the bank to sell its stake to the Tans or to keep the stake.

OCBC, GEH and other Straits Trading shareholders have until Feb 22 to consider accepting the Tan family's offer - that is, unless a higher bid comes in before then from the Lees.

OCBC needs to recognise that it is in a delicate position, that it is being watched, and that it should move carefully. Its move will also set the tone for GEH's decision.    - 2008 January 30    SINGAPORE BUSINESS TIMES

 


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