Bloomberg News

SP Setia Rises to Two-Month High on Bidding War Prospects

September 29, 2011

(Updates with closing share price in second paragraph.)

Sept. 29 (Bloomberg) -- SP Setia Bhd. jumped to its highest in almost two months after it said Permodalan Nasional Bhd.’s buyout offer is unattractive, fueling prospects of a bidding war for Malaysia’s biggest listed developer by sales.

The stock surged 11 percent to 3.87 ringgit as of the 5 p.m. close in Kuala Lumpur, the highest since Aug. 5. Shareholder Permodalan or PNB, Malaysia’s largest state asset manager, offered 3.90 ringgit apiece for the developer, while the company, run by Chief Executive Officer Liew Kee Sin, said it will seek a rival offer.

He “will go all out to look for competing bids, but the challenge is capital outlay,” Yee Mei Hui, an analyst at HwangDBS Vickers Research Sdn., wrote in a report today. PNB is “taking advantage of the current weak sentiments,” she said, adding that the offer values the company at a 24 percent discount to its realizable net asset value of 5.11 ringgit.

PNB’s all-cash bid, which values SP Setia at 6.9 billion ringgit ($2.2 billion), is set to be Malaysia’s biggest property acquisition in at least two decades and follows the asset manager’s 2009 merger of three developers after buying them out. Kuala Lumpur-based SP Setia will give PNB, which manages about 150 billion ringgit of assets, access to projects in Malaysia, Australia and Vietnam.

‘Better Price?’

“There is a good chance of a better price materializing, which in turn may drum up merger and acquisition excitement,” Hong Leong Investment Bank Bhd. wrote in a report today. “Long- term investors who believe in the intrinsic value of the company should not accept the offer.”

The offer represents a premium of 21.5 percent above SP Setia’s five-day volume-weighted average price of 3.21 ringgit, Maybank Investment Bank Bhd., which is acting for PNB, said in a statement yesterday. This compares with an average premium of 34 percent for 17 property deals of more than $500 million in Southeast Asia in the past five years, according to data compiled by Bloomberg.

PNB’s bid “fundamentally undervalues” the company, SP Setia said in the statement yesterday. The board will seek a rival bid and also ask PNB to raise its offer, it said.

SP Setia had sales of 2.3 billion ringgit in the first 10 months of its current financial year that ends in October, and has a target of 3 billion ringgit, the company said on Sept. 22. The developer posted 4.6 percent growth in net income to 91.2 million ringgit in the third quarter ended July 31.

The asset manager bought Island & Peninsular Bhd. for 670.5 million ringgit and Petaling Garden Bhd. for 477 million ringgit in 2007. It took over Pelangi Bhd. two years earlier, and said at the time that it was seeking ways to “maximize” returns, including a possible initial share sale.

--Editors: Linus Chua, Andreea Papuc

To contact the reporters on this story: Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc in Hong Kong at apapuc1@bloomberg.net


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