Stock soars 137% as company targets remaining 25.7% stake

Wheelock and Co Ltd (Wheelock), parent of blue-chip property developer Wharf Holdings Ltd, has offered to privatize another property unit, Wheelock Properties Ltd (WPL), by buying out minority shareholders at HK$13 per share.

The offer price represents a premium of approximately 1.44 times over the last closing price of WPL shares of HK$5.33 before trading was suspended on April 19. But the offer price represents a discount of nearly 3.35 percent to WPL's net asset value per share of nearly HK$13.45 as of 31 December 2009.

Wheelock will pay a total of HK$6.9 billion in cash to buy the approximately 531 million shares - a 25.66 percent stake of WPL, which it doesn't already own. Wheelock currently holds 74.34 percent of WPL.

In a joint announcement released Wednesday, Wheelock advised minority shareholders that the offer price will not be revised in the course of the proposal.

Upon successful privatization of WPL, Wheelock does not intend to make any major changes to the WPL Group's existing operations and management structure. However, it will continue to assess business opportunities as they arise, the announcement said.

Wheelock considers the proposal to be beneficial to WPL existing shareholders, as this can provide opportunities for them to dispose of their investments and take cash at a price significantly above the prevailing market price.

As for the future development of Wheelock and WPL, consolidation of operations is feasible, inasmuch as both publicly listed companies are engaged in property development and investment. The privatization is expected to result in more efficient resources utilization between Wheelock and WPL, the announcement said.

The announcement also said that after privatization, WPL can fund larger property development projects through leveraging Wheelock's greater financial strength. Due to the low liquidity of WPL shares and because its share price exhibits a huge discount to its net asset value per share, the capital market does not provide viable funding sources to WPL.

WPL shares resumed trading Wednesday, when its share price skyrocketed 136.7 percent to HK$12.62, substantially shrinking the premium. The Wheelock & Co share price rose a comparatively modest 1.29 percent, to HK$23.65.

China Daily

(HK Edition 04/29/2010 page3)