Tuesday, October 23, 2012
F&N/OUE: in a similar vein to an earlier Stanchart report, DMG opines that a successful acquisition of F&N would fit in well with OUE's existing businesses, enabling it to scale up its fledgling property arm and providing a well-diversified income stream from various property segments, rather than its current high reliance on hospitality earnings. The house highlights that the latest turn of events is likely to complicate the Thais' efforts to secure majority control of F&N and reckons the OUE consortium will have to offer a decent premium to have a fair chance of succeeding. It estimates that a 10% premium to the Thai group's $8.88/share bid, or around $9.80/share would cost OUE $8.4b after stripping out the APB sale proceeds. As OUE would be financially stretched to make an offer, it could tie up with a partner as there are no lack of suitors for F&N's attractive F&B assets. OUE could hive off its Mandarin Orchard hotel and Mandarin Gallery retail property for as much as $1.5b to interested buyers, and recycle capital from the proceeds into a property portfolio with scale and breadth.