City Developments Limited (CDL) is set to acquire all remaining shares in New Zealand’s Millennium & Copthorne Hotels New Zealand Limited (MCK) through its subsidiary, CDL Hotels Holdings New Zealand Limited (CDLHH NZ), by offering NZ$2.25 per share ($1.72 USD). CDL plans to take MCK private after the offer is completed, in order to simplify its ownership structure in New Zealand, according to a filing on Jan 20.
Currently, MCK owns, leases, or franchises 18 hotels in New Zealand, and also has a majority stake in CDL Investments New Zealand Limited. It also has interests in Australian properties through its Kingsgate Group subsidiaries.
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As of Jan 17, CDLHH NZ holds 80.02 million shares in MCK, representing a 75.86% stake of the total 105.48 million MCK shares in circulation. If CDLHH NZ reaches the threshold for compulsory acquisition under the New Zealand takeovers code, it will acquire all outstanding shares in MCK. CDLHH NZ also has the option to redeem MCK’s non-voting redeemable preference shares.
CDLHH NZ is willing to acquire these preference shares for NZ$1.70 or approximately $1.30 USD each, through its broker Craigs Investment Partners and by purchasing them on the Main Board of the New Zealand Stock Exchange. As of Jan 17, CDLHH NZ already holds 91.34% (or 48.17 million) of MCK’s preference shares.
If all shares are successfully acquired, CDLHH NZ will pay a total of NZ$57.29 million. Additionally, CDLHH NZ expects to pay around NZ$7.77 million for the redeemable preference shares it seeks to acquire. The offer price for both the shares and preference shares takes into account the current and historical market prices, as well as the industry and business environment in which MCK operates.
As of June 30, 2024, MCK’s net asset value (NAV) was NZ$532.02 million, and its net tangible asset value (NTA) was the same. The NAV and NTA attributable to the MCK shares subject to the offer were approximately NZ$85.62 million each.
The offer is conditional upon CDLHH NZ receiving at least 90% of the voting rights in MCK by 5pm on May 2. It is also conditional upon CDLHH NZ obtaining consent under New Zealand’s Overseas Investment Act 2005 and Overseas Investment Regulations 2005 to own and control all shares in MCK.
The implementation and payment of the offer is not expected to have a significant impact on CDL’s earnings per share (EPS) or net tangible assets (NTA) for the fiscal year ending Dec 31, 2025.