Commentary: GLP’s privatisation – why every vote and voter counts

Date: November 23, 2017

First published in Business Times on 21 November 2017

In the first nine months of 2017, we have seen a flurry of merger and acquisition (M&A) activities in Singapore and globally. One such acquisition exercise that has attracted worldwide attention is the proposed acquisition and privatisation of Global Logistic Properties (GLP). If approved by shareholders in November 2017, it will be the largest privatisation of a listed company in Asia.

Do retail investors lose out when a company undergoes privatisation? Not necessarily. Minority shareholders sometimes tell us that they feel compelled to tender their shares for a “lowball price”. However, this year, the majority of successful buyouts have been at healthy premiums to prevailing market prices, while some, as such in the case of GLP, have been at levels higher than historical prices.

GLP shareholders have been offered a scheme consideration of S$3.38 per share, representing premiums of 81 per cent and 64 per cent to the 12-month volume weighted average price and undisturbed share price respectively. It also represents a 30 per cent premium to the net asset value (NAV) per share as of 30 June 2017. According to Peter Ng of Phillip Securities, this premium is significantly higher than those seen from the average price-to-NAV ratios of Singapore-listed developers.

Shareholders who invested during the IPO will see a 9.2 per cent annualised return on their investment, based on the IPO price of S$1.96 – and assuming they reinvested all net cash dividends into GLP over the years.

Strategic review

The scheme is the result of the independent strategic review overseen by GLP’s special committee in December last year. When the strategic review was first announced, several research analysts revised their target prices on expectations of a successful outcome. It is interesting to me that the scheme consideration is still higher than those expected by most analysts as of July 2017.

I hope minority shareholders will take the opportunity to exercise their right to vote on the GLP scheme. I’ve said this before – a scheme ensures protection of the minority shareholder as the overall process is overseen by the High Court. More importantly, it empowers the minority shareholder, allowing them to push for or block a scheme, accordingly. In a scheme, every vote counts. Here’s why.

The scheme has to be approved by a majority of shareholders voting on the scheme – this is the head-count condition. In addition, the scheme has to fulfil a share-count condition, which means the shareholders who vote in favour have to hold at least 75 per cent of GLP shares voted.

In the case of GLP, its largest shareholder GIC Real Estate Private Limited, which holds 36.84 per cent interest, has already given its irrevocable undertaking to vote in favour. While that means the scheme is closer to meeting its share-count condition, their vote is just a mere notch on the head-count condition.

In addition, the role of minority GLP shareholders in the collective decision is made more pronounced, as the offeror and its concert parties will not cast their votes on the scheme. The smaller pool of shareholders and shares allowed to vote only serves to strengthen the power of minority shareholders to affect the result of the scheme.

Doing one’s homework

Whatever the case may be, shareholders should to do their homework to make a well-informed decision on how to vote accordingly, based on evaluation of their own risk tolerance and investment objectives. They should refer to the opinion of the Independent Financial Adviser (IFA). Evercore, the IFA on the offer for GLP, is of the view that the scheme consideration is fair and reasonable from a financial point of view. The independent directors concur with the IFA’s recommendation and have recommended that GLP shareholders vote in favour of the scheme.

If the scheme is approved, GLP will be delisted from the SGX. If it is not approved, GLP will continue to be listed, and shareholders who had voted for the scheme will still hold their shares and not receive any payment. Evercore also mentioned that there is no assurance that the price of GLP shares will remain at current levels, if the scheme is terminated.

Shareholders should not assume an outcome and not vote just because they think their vote will not make a difference. The outcome affects all minority shareholders, and they should exercise their right to participate in the vote. Even those who cannot attend the scheme meeting should consider submit their vote by proxy, and to do so before the deadline of 27 November 2017.

David Gerald
Founder, President & CEO
Securities Investors Association (Singapore)