CDL Subsidiary Offers to Acquire Remaining Shares of MCK
In a strategic move, City Developments Limited (CDL) is making an offer to buy all the shares it does not already own in New Zealand-listed Millennium & Copthorne Hotels New Zealand Limited (MCK). The offer, valued at NZ$2.25 ($1.72) per share, is being made through CDL’s wholly-owned subsidiary, CDL Hotels Holdings New Zealand Limited (CDLHH NZ).
Upon completion of the offer, CDL intends to delist and privatize MCK, simplifying the ownership structure of the group’s New Zealand entities, according to a January 20 filing. MCK currently owns, leases, or has under franchise 18 hotels in New Zealand, as well as having a stake in CDL Investments New Zealand Limited and interests in properties in Australia through its Kingsgate Group subsidiaries.
As of January 17, CDLHH NZ held a 75.86% stake in MCK, representing 80.02 million shares out of 105.48 million in issue. If CDLHH NZ reaches the threshold to invoke compulsory acquisition provisions under the New Zealand takeovers code, it will acquire all outstanding shares in MCK. Alternatively, CDLHH NZ may choose to redeem non-voting redeemable preference shares issued by MCK.
While the non-voting redeemable preference shares are not part of the offer, CDLHH NZ has expressed its willingness to acquire them at a price of NZ$1.70 (approximately $1.30) per share. The purchase will be made through its broker, Craigs Investment Partners, on the Main Board of the New Zealand Stock Exchange (NZX). As of January 17, CDLHH NZ held 91.34% (48.17 million shares) of MCK’s non-voting redeemable preference shares.
Assuming full acceptance by MCK’s shareholders, CDLHH NZ will pay a total of NZ$57.29 million for the offer. In addition, it expects to pay around NZ$7.77 million to acquire all redeemable preference shares. The offer price takes into account the prevailing and historical market price, as well as the industry and business environment in which MCK operates.
As of June 30, 2024, MCK recorded a net asset value (NAV) of NZ$532.02 million and a net tangible asset value (NTA) of the same amount for the 1HFY2024. The NAV and NTA attributable to MCK shares subject to the offer were NZ$85.62 million each as of June 30, 2024.
The offer is subject to conditions including CDLHH NZ receiving 90% or more of the voting rights in MCK by May 2. CDLHH NZ must also obtain consent under the Overseas Investment Act 2005 and the Overseas Investment Regulations 2005 of New Zealand to own and control all shares in MCK. The implementation and payment of the offer are not expected to have a material impact on CDL’s earnings per share (EPS) or net tangible assets (NTA) for the fiscal year ending December 31, 2025.