City Developments Ltd. said it will not increase its £6.20-per-share final buyout offer for Millennium & Copthorne Hotels Plc and urged Millennium shareholders to consider the "very material premium and value" available to them under the offer.
A group of minority investors in Millennium recently rejected the upsized takeover bid by City Developments and urged fellow investors to follow suit to defeat the bid.
The final offer represents a premium of 36.3% to the £4.55-per-share closing price of Millennium on Oct. 6, which City Developments said is a very substantial premium given it already owns 65.2% of Millennium. Additionally, the final offer is higher than the price at which Millennium shares have closed on any day in the 10 years preceding the Oct. 9 possible offer announcement.
In a letter to Millennium independent directors made public Dec. 18, City Developments Chairman Leng Beng Kwek touted the final offer as "an opportunity that is highly unlikely to be repeated again in the near future."
Kwek said Millennium shareholders should consider the benefits of the offer rather than the false premise of unrealized real estate value that City Developments does not believe can be practically delivered.
"The CDL board sincerely hopes that the actions of a few shareholders who have entered since the financial crisis will not preclude a number of long-term shareholders from being able to take advantage of this offer to exit from their holding in an illiquid stock at a real and significant premium," Kwek added.
Kwek also noted that City Developments' board has carefully reviewed the arguments made by a small number of Millennium shareholders that the final offer should be based on net asset value.
"These valuations only exist in theory and if attempts were made to crystallize them, would prove ethereal, and we believe this jeopardizes the interests of the many other, often longstanding, shareholders," Kwek said in the letter.
The chairman added that City Developments remains committed to keeping Millennium's strategy as both a hotel owner and operator.
"Should the final offer not be accepted, CDL is fully prepared for M&C to address the operating challenges it faces as a public company, with all shareholders sharing the burden of the significant capital expenditure that is required simply to bring the M&C hotels into line with their competitors," Kwek added.