United Engineers

[HitandRun]

Just want to check, will this news affect UE E&C?

Or can they be totally viewed as 2 different companies?

I have a hypothesis.

UE needs $$$ and UE E&C appears to have quite a bit of $$$ in its balance sheet. Would it be unthinkable for nice dotter to dividend some of its extra $$$ to mummy to help pay for the acquisition? Based on my chin chai estimate, UE E&C can easily afford up to $0.30 dividend.....

[pianist]

Could have been earlier. I think I waited too long as I wanted to see how the takeover played out. To be honest, when the news broke of the takeover of WBL, I had my misgivings as there was honestly no synergy. Should I have sold then? But then again, if the takeover failed (I had assumed STC would have blocked it), I would have exited prematurely.
Ah well, at least I know I won't be sweating over what happens in the morning (night time for me as I am half way round the world now, so I can sleep soundly!)

what do u mean by half way around the world? globe trotting?

[LionFlyer]

what do u mean by half way around the world? globe trotting?

biz trip, south america. about 11 hours behind singapore. so your morning is my night.

[Penguin Papa]

Just want to check, will this news affect UE E&C?

Or can they be totally viewed as 2 different companies?

I have a hypothesis.

UE needs $$$ and UE E&C appears to have quite a bit of $$$ in its balance sheet. Would it be unthinkable for nice dotter to dividend some of its extra $$$ to mummy to help pay for the acquisition? Based on my chin chai estimate, UE E&C can easily afford up to $0.30 dividend.....

Another case of daughter give money to mother? Like filial STX OSV and SembMarine?

[pianist]

Another case of daughter give money to mother? Like filial STX OSV and SembMarine?

this kinda practice is quite prevalent here...the culture here children are expected to give monies to parents..there is even a parent maintenance act enacted..in case u r not aware.

[CityFarmer]

United Engineers to raise S$490m in rights issue to repay loans

SINGAPORE — United Engineers (UE) is planning to raise nearly S$490 million from a one-for-one rights issue to repay bank loans after it succeeded last month in taking over technology, property and car distribution company WBL.

UE plans to offer up to 326.6 million rights shares at S$1.50 each, representing a discount of about 47.6 per cent from the last transacted price of S$2.86 on the Singapore Exchange on Monday, and a discount of about 31.2 per cent from the theoretical ex-rights price of S$2.18, the company said in a regulatory filing after the market closed yesterday.

http://www.todayonline.com/business/unit...epay-loans

[greengiraffe]

Wrong term, rock solid shareholders will be all right... anyway, it remains unclear if OCBC/GE is disposing their WBL stake to UE and then recycling their takeover proceeds to take up their rights... inputs deeply appreciated

ST: Is OCBC taking a shine again to non-banking investments?

Question arises as it will pump $93m into UE after years of divesting non-core assets

Published on Jun 13, 2013

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By Jonathan Kwok

SINGAPORE'S second-largest lender OCBC Bank is set to pump $93 million into a non-banking asset.

This may be a relatively small sum but it seems something of a U-turn after the bank long made clear its long-term aim of selling non-banking assets to focus on its core business.

Earlier this year, OCBC, together with the founding Lee family and its Great Eastern Holdings insurance unit, supported United Engineers (UE) in its takeover bid for WBL Corp.

OCBC holds 20 per cent of UE and about 7 per cent of WBL, and its support as a "concert party" for the bid just meant its stake would be added to UE's acceptances - but it would not sell its WBL shares to UE.

Now, OCBC is going the extra mile. On Tuesday, UE unveiled a rights issue to cut its massive borrowings as it pays for WBL. The bank will subscribe to its full allotment.

At $1.50 per rights share and with OCBC's direct and indirect stake of 62.21 million shares, the bank, together with its units, would need to fork out about $93 million.

So after years of raising money from selling non-banking stakes, OCBC has moved to spend money to sustain and grow UE, a property, engineering and construction firm, which just bought WBL - a real estate, automotive and technology firm.

Shareholders could be forgiven for wondering whether OCBC has developed a non-banking focus once again.

In recent years, OCBC has disposed of legacy stakes in Raffles Hotel, The Straits Trading Company, Robinson & Co, Fraser and Neave (F&N) and Asia Pacific Breweries (APB).

Of course, the bank has been prodded along by the Monetary Authority of Singapore, which in 2000 told Singapore banks to reduce stakes in non-financial businesses to 10 per cent or less - to reduce the risk posed to the banking sector by such activities in the wake of the Asian financial crisis.

But even after OCBC met the deadline and was facing no more regulatory pressure, it kept selling its non-banking businesses.

For instance, last year the bank sold its valuable F&N and APB stakes to parties linked to Thai tycoon Charoen Sirivadhanabhakdi.

"We will continue to review possibilities to divest our non-core assets as and when attractive opportunities arise," said OCBC chief financial officer Darren Tan, when the F&N and APB stake sales were announced. "We will reinvest the gains... into our core financial businesses."

For now at least, the bank said its strategies remain unchanged.

"There has been no change to our investment objective of maximising financial returns, which means divesting at the appropriate time," Mr Tan told The Straits Times yesterday. "By (subscribing to the rights issue), we are merely maintaining our existing shareholding level in UE, without being diluted." Mr Tan said OCBC is supporting UE as a shareholder. The bank expects the acquisition to benefit UE, and in turn, it would benefit as a shareholder. "We will continue to monitor our investment in UE, with a view to maximising our long-term investment returns," said Mr Tan.

Still, raising the UE investment is a bold gambit for the lender. UE shares have lost 20 per cent since late January, when UE said it would bid for WBL.

Investors have been concerned as UE raised its price twice to secure WBL and Tuesday's rights move led to another slide. UE lost 15 cents or 5 per cent to $2.66 yesterday. Evidently, even as OCBC sees the value of a UE-WBL tie-up, the market sees otherwise.

Some market watchers are already wondering if it would be better for OCBC to have earlier this year tried to maintain the status quo at WBL - withholding support for UE's bid while trying to work together within WBL alongside Straits Trading, formerly the largest WBL shareholder.

At the very least it would be saving $93 million - when it is essentially helping pay for the WBL purchase, through UE's rights issue.

Now it is up to the managers of WBL and UE to make the merger work out and vindicate OCBC's faith.

jonkwok@sph.com.sg



Background story

NO CHANGE

There has been no change to our investment objective of maximising financial returns...

By (subscribing to the rights issue), we are merely maintaining our existing shareholding level in UE, without being diluted.

- OCBC chief financial officer Darren Tan

[egghead]

I would like to pick the mind of fellow buddies here on the general considerations for pricing a rights issue.

Clearly, there are 2 variables in such an issue (1) price (2) ratio. The proposed issue here is 1 for 1 at $1.50 per right share. If we play with these 2 variables, it can be seen that there are other combinations to raise the same proceed e.g. 3 for 5 at $2.50 per right share. Why would UE management choose to issue 1 for 1 at $1.50 when they can raise the same amount with 3 for 5 at $2.50? At least to avoid such a big discount to prevailing traded price.

[valuehunter]

I would like to pick the mind of fellow buddies here on the general considerations for pricing a rights issue.

Clearly, there are 2 variables in such an issue (1) price (2) ratio. The proposed issue here is 1 for 1 at $1.50 per right share. If we play with these 2 variables, it can be seen that there are other combinations to raise the same proceed e.g. 3 for 5 at $2.50 per right share. Why would UE management choose to issue 1 for 1 at $1.50 when they can raise the same amount with 3 for 5 at $2.50? At least to avoid such a big discount to prevailing traded price.

My 2 cents:

Though the absolute quantum is the same at $1500 per lot owned, $1.50 per right share looks cheaper compared to $2.50. Hence may be more attractive.

Secondly, this helps avoid odd lots, notwithstanding the fact that shareholders can always apply for excess rights shares.

[KopiKat]

I would like to pick the mind of fellow buddies here on the general considerations for pricing a rights issue.

Clearly, there are 2 variables in such an issue (1) price (2) ratio. The proposed issue here is 1 for 1 at $1.50 per right share. If we play with these 2 variables, it can be seen that there are other combinations to raise the same proceed e.g. 3 for 5 at $2.50 per right share. Why would UE management choose to issue 1 for 1 at $1.50 when they can raise the same amount with 3 for 5 at $2.50? At least to avoid such a big discount to prevailing traded price.

My 2 cents:

Though the absolute quantum is the same at $1500 per lot owned, $1.50 per right share looks cheaper compared to $2.50. Hence may be more attractive.

Secondly, this helps avoid odd lots, notwithstanding the fact that shareholders can always apply for excess rights shares.

How will this 1-for-1 rights affect the Exercise Price for their Employee Share Options? If it's a simple matter of dividing by 2 (since no. of shares doubled), there'd be the added incentive to make the '07 ones (Exercise Price @ $3.68), which also happened to be the largest block issued, become more achievable...

Or perhaps the new exercise price is computed much like how we calculate TERP. In that case, the lowest exercise price is $1.51 for '09 ones, which is very close to the $1.50 Rights.

Reference : AR2012 pg47