SINGAPORE: Singapore's Paragon REIT said on Tuesday it received a buyout offer from its major shareholder, Cuscaden Peak, and parties valuing the real estate firm at S$2.78 billion (US$2.05 billion).
The offeror, which holds an indirect stake of 61.5 per cent in Paragon REIT, proposed to buy the remaining shares of the REIT at S$0.98 per share.
The offer represents a 10.1 per cent premium to the stock's closing price on Monday and a 4.4 per cent premium to the REIT's fiscal 2024 net asset value (NAV) per unit of S$0.9385.
Paragon REIT will also pay cash distribution of 2.33 Singapore cents per unit for the second half ended December, according to the statement. When excluding this cash distribution, the offer still marks a 7.1 per cent premium to NAV.
Paragon REIT is expected to be delisted by the end of May and will become a unit of Cuscaden Peak. An EGM will be called in April to seek shareholder approval.
Cuscaden Peak and parties holding 61.5 per cent of Paragon REIT will abstain from voting, the statement said.
Additionally, the offeror plans to undertake an asset enhancement initiative, given Paragon REIT's portfolio heavily relies on Paragon, a 30-year-old shopping mall in the city's Orchard Road shopping belt.
A potential total capital expenditure to refurbish Paragon Mall could amount to S$300 million to S$600 million, according to the statement.
The offeror said the mall's premier upscale status faces competition from malls undergoing major upgrades and upcoming redevelopments in the surrounding area.
"In the face of the uncertainties in the execution and extent of such an initiative, it would be more suitably carried out with Paragon REIT as a private entity," said Gerald Yong, chief executive officer of the sponsor and director of the offeror.
Cuscaden Peak is a real estate firm jointly owned by Mapletree Investments and CLA Real Estate Holdings, which are ultimately controlled by Singapore state investor Temasek .
Citigroup is the financial adviser to the offeror, while Morgan Stanley is the financial adviser to Paragon REIT.
Separately, Paragon REIT reported a 4.5 per cent year-on-year rise in net property income to S$113.9 million for the second half ended December, and a 5.3 per cent increase in gross revenue to S$153.6 million driven by improved rental reversions.