Why GLP remains an attractive takeover target

This is despite the firm's denial of takeover talks.

Takeover discussions involving an investor consortium comprising entities with significant links to GLP were reported by Bloomberg. While GLP has since clarified that it was not in talks with these investors at that time, UOBKayHian would not dismiss either a privatisation bid or a scheme of arrangement (a la ARA Asset Management) especially since GIC’s recent S$3.7b purchase of a European portfolio.

According to the research house, GLP’s CEO Ming Z Mei has repeatedly expressed his interest in Europe, with the company looking at acquisition opportunities there.

GIC’s acquisition (possibly 2016’s largest deal in Europe, according to GIC) could have resulted in GLP being a leading warehouse player in Europe. UOBKayHian thinks that substantial shareholder GIC (37% stake in GLP) decided to forge ahead with the Europe acquisition without GLP, hints at other corporate actions supplanting further geographic diversification.

The research house also do not rule out the possibility of a privatisation bid via scheme of arrangement that would allow GIC to retain its 37% stake, and also potentially grant GLP greater access to the China market through its consortium partners.

"This was a key reason for GLP divesting 30.2% of its China assets to Hopu Investment and other investors in 2014. We reckon the scalability of the fund management business could prove compelling to potential investors even after factoring in a takeover premium," it said.

It is estimated that the above mentioned asset monetization could add US$28. 7b fee-generating AUM.

"Using the EV/AUM methodology, we value GLP’s scaled-up AUM of US$68.4b at S$4.25. This suggests an attractive 43% discount even after pricing in a takeover premium of 20% to the last traded price (similar to Keppel Land’s Jan 15 privatisation bid, and more recently ARA Asset Management)," it said.

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