Straits Trading

Straits Trading (STRTR) has signed an agreement for the sale of the Straits Trading Building to the Sun Venture Group for $450m. The monetisation is in line with the group’s strategy of redeploying its capital from its portfolio of high quality, but low yielding investment properties into potentially higher return real estate opportunities. The redeployment of the proceeds will also strengthen the development of Straits Trading’s real estate ecosystem anchored by its 89.5% interest in Straits Real Estate, its 20.1% interest in ARA Asset Management, and its 5.8% aggregate interest in Suntec REIT. The company is expected to realise an estimated capital gain of $39m on the sale of the building based on its latest book value as at 30 Jun '14, while based on its historical cost, the gain to the company will be $373m. The transaction is expected to be completed the end of 2014. We highlight that some analysts have speculated that the potential sale of Straits Trading Building by STRTR could be an attempt by the group to prepare its warchest for a potential bidding war in United Engineers, which is currently controlled by OCBC’s Lee Family. History between the Tan Family which controls STRTR and the Lee Family dates back to the 1920s, although relations between the two families have appeared “less cordial” in the last decade, sparked by disagreements over stake sale of companies and M&A tussles in STRTR and WBL Corp. To refresh investor’s memories, in 2012, STRTR launched a takeover offer for WBL Corp (67.6% owned by United Engineers), sparking a counter offer by the Lees’, alongside related companies in OCBC and Great Eastern, which subsequently led to the delisting of WBL.