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Frasers Property Moves to Take Frasers Hospitality Trust Private

News Summary

Frasers Property is making a renewed effort to privatize its real estate investment trust, Frasers Hospitality Trust, with a valuation of S$1.37 billion. The company has increased its offer to S$0.71 per share, representing a 7% premium over the stock’s last traded price. This is Frasers’ second attempt at a buyout following an unsuccessful offer in 2022. The move aims to provide shareholders with returns above net asset value while navigating challenges in the hospitality sector, which is still recovering from the pandemic.

Singapore – Frasers Property is making a renewed effort to take its real estate investment trust, Frasers Hospitality Trust (FHT), private with a valuation of S$1.37 billion (approximately $1.1 billion). The Singapore-based company, which currently owns more than 60% of FHT’s shares, has offered S$0.71 per share for the remaining shares that it does not currently hold.

This current bid marks Frasers’ second attempt at a buyout; the first initiative took place in 2022, when the company offered S$0.70 per share, but this offer garnered insufficient support from shareholders. The new offer price of S$0.71 per share represents a 7% premium over FHT’s last traded price of 66.5 cents before a trading halt on May 13. Additionally, this price reflects a 36.3% premium compared to the past 12-month volume weighted average share price.

Frasers Property holds a 24.23% stake in FHT, while TCC Assets, a family conglomerate, controls an even larger share of 36.72%. The ongoing strategy review at Frasers Property cited several challenges facing the company, including unfavorable foreign exchange rates, rising interest rates, global cost inflation, as well as the lingering effects of Brexit and the COVID-19 pandemic.

The board of Frasers Property believes that privatizing FHT would provide a pathway for shareholders to realize their investments at a premium to the net asset value, while also ensuring a stronger sense of deal certainty. The smaller size of FHT compared to its peers has been identified as one of the factors leading to a higher cost of equity and limiting the trust’s debt capacity.

FHT’s portfolio includes 14 hotels and serviced residences spread across nine cities in Asia, Australia, and Europe, featuring significant properties such as InterContinental Singapore and Fraser Suites Sydney. As of September 2024, FHT has a market capitalization of $1.27 billion and a total portfolio valuation totaling approximately $2 billion.

The proposed scheme is contingent upon receiving necessary regulatory and court approvals, as well as obtaining majority consent from stapled security holders. Frasers Property’s Chief Financial Officer expressed the company’s ongoing commitment to achieving long-term sustainable returns, despite the current challenges faced by the hospitality sector.

Frasers Property is strategically positioned to navigate the complexities of the current market environment, which will be crucial as it seeks to complete this buyout. With the hospitality industry still recovering from the impacts of the pandemic and economic fluctuations, the outcome of this privatization attempt is poised to be a significant development for stakeholders involved.