OUE will dare to shell out this much for F&N

It will knock off TCC's $8.88 offer.

According to Nomura, the OUE-led consortium released its formal conditional general offer on 6th December and has set 3 January 2013 as the deadline for its offer.

Here's more from Nomura:

The consortium can extend its offer after this initial deadline. Meanwhile, TCC’s current offer of SGD8.88 per share for F&N will expire by Dec 11. We expect TCC to respond to OUE’s offer with a higher bid for F&N.

To get an estimate of how much the OUE-led consortium is prepared to pay for F&N, we use IRR analysis. We assume that OUE will, if it gains control of F&N, move quickly to divest the non-property businesses including the F&B business and the printing and publishing business.

We also assume that the consortium will leverage up to 85% of the cost of the general offer which after adjusting for the APB cash proceeds implies an effective leverage of 66%.

We also assume that F&N’s assets will be divested by end-2014 with the F&B business divested at SGD2.7b and the printing and publishing business at about SGD320m.

While OUE might want to retain the property assets, we assume for calculation purposes a full value for the property assets per the estimate made by the IFA adjusted for the sale of Fraser Property China, i.e. SGD6.6b.

Assuming a minimum project IRR of 26%, we estimate the consortium can bid up to SGD9.88.

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