Complete Property Market Updates of Singapore

April 23, 2008

Lippo agrees to sell Robinson stake to Dubai retail giant

Filed under: General — Propertymarketupdates @ 4:37 am

It accepts higher price of $7.20 a share, giving up control of retailer

INDONESIA’S Lippo Group yesterday agreed to sell its shares in Robinson & Co, paving the way for Singapore’s oldest retailer to be taken over by the Al-Futtaim Group of Dubai.
Lippo, which owns 29.99 per cent of the department store chain, held out from selling until the very last moment, forcing Al-Futtaim to extend its offer deadline and raise its price twice.

The Indonesian group finally accepted the offer just before the 5.30pm deadline yesterday at a price – $7.20 a share – that was almost a dollar higher than the initial offer of $6.25.

With Lippo’s acceptance, Al-Futtaim would control 60.8 per cent of Robinson.

Barely two hours later, the acceptance level had soared to 87.2 per cent. The offer is now unconditional and has been extended to April 30 for the remaining shareholders.

These include OCBC Bank, which holds about 6 per cent of Robinson. OCBC declined to comment on whether Lippo’s move would affect its decision on its stake.

Lippo president Stephen Riady said $7.20 a share was ‘a good price’ for the group’s stake. ‘We bought it at $7.90 a share but received dividends of $1.50, so our cost is really $6.40,’ he told The Straits Times yesterday.

But he also gave other reasons for the sale: ‘The rationale for the disposal is the uncertain prospect of the retailing industry, because of the current adverse global situation.

‘Also, I think the big market for retail is really China and Indonesia. Robinson is not ready to go to China yet. It is focusing on Singapore and Malaysia, but this is a relatively small market.’

Mr Riady also raised concerns about Robinson’s rising cost of doing business in Singapore, with property rentals and staff costs escalating.

He also spoke of how department stores in Singapore are grappling with obsolescence, as mall owners start to favour smaller retailers.

‘Over the last two years, the owners of all the major retail malls in Singapore have gone, one by one, to Reits,’ he said. Reits, or real estate investment trusts, are listed funds that buy properties and collect rental income, which they distribute to unitholders like dividends.

‘The only interest of Reits is to increase yields, to ensure performance. If you have an anchor tenant like a department store, the rent is lower, so they don’t want that.’

Lippo is exiting Robinson less than two years after it bought its stake from OCBC and shook up Robinson’s board, ousting long-serving chairman Michael Wong Pakshong.

Under Lippo’s control, the 150-year-old retailer has been expanding steadily, opening a store in Kuala Lumpur and bringing in new brands.

Al-Futtaim has said it plans to accelerate this expansion and use Robinson as its own gateway into South-east Asia.

The Dubai group is headed by chairman Abdullah Al Futtaim, who is worth US$3 billion (S$4.15 billion) and was ranked the 287th richest person in the world last year by Forbes magazine.

Forbes said Al-Futtaim, which is the exclusive distributor for brands such as Ikea and Toyota in the United Arab Emirates, as well as Marks & Spencer, a franchise held by Robinson in Singapore, is ’so large and profitable that it may make up as much as 15 per cent of Dubai’s gross domestic product’.

Al-Futtaim’s bid sent Robinson shares to a three-year high even as other stocks endured wild swings recently.

But the stock fell 14 cents yesterday to $6.86 before Lippo’s announcement, possibly because of some jittery investors who feared that Al-Futtaim’s offer would lapse, which might have sent the shares tumbling.

Source : Straits Times – 4 Apr 2008

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