Jardine Matheson to delist Mandarin Oriental at US$3.35 a share; Mandarin Oriental sells HK property for US$925 million

[SINGAPORE] Controlling shareholder Jardine Matheson is moving to take Mandarin Oriental private in a recommended cash takeover valued at US$3.35 per share, bringing the company’s total valuation to about US$4.2 billion.

Jardine Matheson’s wholly owned subsidiary Bidco will acquire the remaining 11.96 per cent of Mandarin Oriental shares it does not already own. The offer includes a US$2.75 scheme value and the US$0.60 special dividend from the hotel group’s sale of part of One Causeway Bay (OCB), a commercial development in Hong Kong.

It represents about a 52.3 per cent premium to Mandarin Oriental’s closing price of US$2.20 on Sep 29 – the last business day before the company announced the possible OCB sale – and a 53.7 per cent premium to its net asset value of US$2.18 per share as at Jun 30.

Mandarin Oriental on Friday (Oct 17) said that it will sell part of the top 13 floors of OCB, the building’s rooftop signage and 50 parking spaces – totalling 301,555 square feet (sq ft) in floor area – to Jack Ma’s Alibaba Group and Ant Group for US$925 million.

The remaining office space spanning 286,984 sq ft and retail component, which takes up 82,550 sq ft, will remain owned by Mandarin Oriental.

Jardine Matheson noted that the privatisation of Mandarin Oriental aligns with its strategy to “deliver superior, long-term returns” from its portfolio of businesses and is in line with its capital allocation framework.

It added that full private ownership of Mandarin Oriental would simplify its own corporate structure and better support the hotel group’s growth. The acquisition is also intended to give shareholders a chance to realise full value for their Mandarin Oriental shares.

If the deal does not proceed, Jardine Matheson plans to continue pursuing the company’s delisting by other means.

Jardine Matheson also pointed out that Mandarin Oriental shares have historically had low trading volumes and liquidity, often trading below adjusted net asset value. The deal would, thus, allow shareholders to sell their shares at a premium and receive cash return from the OCB sale via the US$0.60 per share special dividend.

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Jardine Matheson plans to finance the scheme value through cash on its balance sheet, alongside committed facilities.

If the scheme goes ahead, Mandarin Oriental will be delisted from all its stock exchanges, including in Singapore.

One Causway Bay sale

Mandarin Oriental said that the partial sale of One Causeway Bay is part of its asset-light strategy and will enable a “significant return” of capital to its shareholders.

From the proceeds, the company will repay US$96 million in borrowings drawn for the construction of the property.

It will also retain up to 3 per cent of the gross proceeds to fund the remaining construction cost of OCB, as well as provide Alibaba and Ant Group with a fixed sum of US$37 million towards planned enhancements to the property.

After selling expenses, about US$758 million will be distributed to shareholders via a special dividend of US$0.60 per share.

Jardine Matheson and Mandarin Oriental will release their third-quarter financials on Nov 21.

In Singapore, shares of Jardine Matheson closed on Friday 0.8 per cent or US$0.48 higher at US$61.13, and Mandarin Oriental ended 0.4 per cent or US$0.01 higher at US$2.40.