The independent directors of London Stock Exchange’s AIM-listed Unitech Corporate Parks (UCP) has shot down a proposed acquisition of the group offshoot of India’s Unitech Ltd by the parent firm as they found the offer price too low.
Unitech had made a cash offer for UCP at 31 pence per share. The proposal that was subject to certain pre-conditions including the raising of finance by Unitech to fund the proposed offer, would have cost Unitech £106.5 million or about Rs 776 crore. The proposed plan was in connection with the demerger of Unitech’s infrastructure business into Unitech Infra Ltd.
Unitech already owns 4.52% of UCP (through a wholly-owned subsidiary Nectrus Limited that also acts as investment manager for UCP) with promoters owning a further 0.22% of the London-listed firm. Moreover, Unitech holds an approximate 40% interest in UCP's property assets.
Based on the potential medium-term value of UCP’s property portfolio, if it were to remain an independent entity, the medium term prospects for Indian SEZ office developments and the valuation of the property portfolio carried out by its independent valuers Knight Frank (as at 31 July 2010) the independent directors concluded “that the indicative pre-conditional offer at 31p per UCP share significantly undervalues the company today and does not represent an offer which they could recommend shareholders to accept.”
The independent directors of UCP considered Unitech’s proposal in conjunction with their financial advisers PricewaterhouseCoopers Corporate Finance and Arbuthnot Securities, and property advisers.
Unitech’s offer to buy out the shares represented a premium of 22.8% to the closing middle market price of 25.25 pence per UCP share on July 26, 2010. UCP shares have shot up after Unitech made the offer and last traded at 33 pence, having risen around 50% in last one year.
The top five shareholders of UCP include ABN Amro (20.7%), HSBC (15.9%), Roveda Holdings (9.2%) and Capital (5%). UCP had raised around £360 million through an AIM listing in December 2006.
UCP's business strategy involves investing in commercial real estate in India which is being developed specifically for IT and ITES sectors. Unitech owns the residual interest in all the UCP assets except in Unitech Hi-Tech Structures Ltd where third parties hold 4%, UCP holds 60% and Unitech Ltd holds 36%. Its seed portfolio projects comprise six IT or ITES related projects, five of which are located in the National Capital Region besides one which is located in Kolkata.
Acquisition of UCP would have brought revenues from all these assets under consolidated numbers of Unitech.