Chip Eng Seng, on April 5, announced that it has proposed to acquire a minority interest in the property at 8 Shenton Way (the former AXA Tower).
On April 4, Chip Eng Seng’s wholly-owned subsidiary, CEL Shenton, entered into a share purchase agreement (SPA) with Kuok (Singapore), Shenton Circle, Imagine Properties, PE One and Huatland Development (collectively the sellers) to acquire 21.0% of the issued share capital in PRE 13 for a consideration of $2.13 million.
PRE 13 holds a 50% effective stake in 8 Shenton Way.
The consideration was based on an agreed asset value of $1.68 billion for the property and took into account the net asset value (NAV) of PRE 13 as at Feb 28. It also took into consideration the redevelopment potential of the property and the marketability of the new development. The consideration excludes loans.
Under the SPA, CEL Shenton will take over a proportionate principal amount of the shareholders’ loans granted by the sellers to PRE 13. It will also commit to contribute its proportionate share of additional shareholders' loans required for the redevelopment of the property and other funding requirements of up to $251.0 million.
At the same time, Sing-Haiyi Emerald had also entered into a separate SPA on April 4 with the sellers to acquire another 21.0% of the issued share capital in PRE 13 for a consideration of $2.13 million.
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The terms of the SPA for Sing-Haiyi Emerald are similar to that of CEL Shenton’s.
The acquisition of both CEL Shenton and Sing-Haiyi Emerald is not inter-conditional on the other.
Following the completion of the acquisitions, CEL Shenton and Sing-Haiyi Emerald will hold a total stake of 42.0% in PRE 13. The remaining 58.0% will be held by PRE 13’s remaining shareholders, Perennial Singapore Investment Holdings, Piermont Holdings Limited, and HPRY Holdings Limited.
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In addition, CEL Shenton and Sing-Haiyi Emerald will hold an effective interest of 10.5% in the property.
According to Chip Eng Seng, the proposed acquisition is said to allow the company to acquire a meaningful stake in a prime real estate site located within the central business district (CBD).
In addition, the company is able to participate in a large-scale redevelopment project, which is expected to be an iconic landmark within the CBD upon its completion.
The project will add to the pipeline of Chip Eng Seng’s property development projects in Singapore; the company will be able to mitigate its financial and execution risks through participating in a large-scale redevelopment project with other partners.
The property and proposed redevelopment
Photo: Perennial Real Estate
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8 Shenton Way is owned by Perennial Shenton Property, the wholly-owned subsidiary of Perennial Shenton Holding.
PRE 13, being the target company, holds 50% of the issued share capital in Perennial Shenton Property. The remaining 50% is held by Alibaba. Alibaba purchased the stake in May 2020.
The property has a total site area of 10,983.80 sqm. It has a 99-year leasehold land tenure starting from July 19, 1982.
The property will be redeveloped into a mixed-use commercial and residential development, comprising office, retail, hotel and residential components, with a maximum allowable gross floor area of 144,162.38 square metres and a gross plot ratio of 13.125.
Perennial Group is also expected to continue to provide property management and asset management services in respect of the property.
Interested person transaction
Gordon Tang and his wife Celine Tang are the controlling shareholders of Chip Eng Seng. Celine Tang is also the non-independent and non-executive director, and non-executive chairman of Chip Eng Seng. The Tangs, through intermediate holding companies, collectively have an interest in all the shares of Sing-Haiyi Emerald.
Perennial Singapore Investment Holdings is a wholly-owned subsidiary of integrated real estate and healthcare company Perennial Holdings. Piermont Holdings is a wholly-owned subsidiary of agribusiness group Wilmar International. HPRY Holdings is wholly-owned by Kuok Khoon Hong, a director and controlling shareholder of Perennial. Kuok is also the chairman and CEO of Wilmar.
The proposed acquisition will be funded by CEL Shenton from internal cash sources. Its pro rata share of the equity portion of the total redevelopment costs for the property will be funded from internal cash sources and, or bank borrowings. The proposed acquisition is not expected to have a material impact on Chip Eng Seng’s net tangible assets (NTA) and earnings per share (EPS) for the current financial year ending Dec 31.
Shares in Chip Eng Seng closed at 45 cents on April 4.
