Despite launching a formal sale process, the world’s second-largest logistics company, Global Logistics Properties (GLP), seems most likely to end up as a private company in the hands of a consortium led by China Investment Corporation (CIC).
Singapore-listed GLP, which manages US$39bn (€37bn) in assets, has approached a number of potential buyers, including rival logistics specialists Goodman and Prologis, and large fund managers Brookfield and Blackstone, according to industry sources.
But sources believe a Chinese takeover is the most likely outcome.
“Many groups have been asked to take a look [at GLP],” a leading industry professional told IPE Real Estate. “[But] we don’t see this as an opportunity for us.”
A number of sources told IPE Real Estate that, although GLP has a “great platform and an equally great landbank”, it has been vulnerable to a takeover because of its weak share price.
The company is trading at a discount to its net asset value (NAV). According to analysts, its NAV per share is SGD3.06, but trading closed on Wednesday at SGD2.55.
A takeover bid would be unsurprising, Derek Chang, an equity analyst with leading Singapore brokerage UOB Kay Hian, said in a note to clients last week.
“It is cheap and it makes sense that GLP would be a great M&A target,” A global property securities fund manager told IPE Real Estate.
GLP was floated in October 2010 at SGD1.96 per share, attracting strong institutional and retail interest. But institutional investors started to sell down their stakes from late-2014 after GLP sold 31% of its Chinese assets to a consortium led by Beijing company HOPU for US$2.5bn.
GLP created Iowa China Offshore Holdings, a company owned by the consortium and GLP employees, to hold the assets. The consortium includes China Life, Bank of China and other Chinese state-owned enterprises.
An international investor told IPE Real Estate that this “completely de-rated the company”. He said “Investors could see no alignment of the management with minority investors’ interests.”
GLP’s share price began to slide downwards from that point, and has only recovered on rumours of its sale since late-November.
Speculation of a sale emerged after GIC, Singapore’s sovereign wealth fund and GLP’s largest shareholder, instigated a strategic review six weeks ago. GLP confirmed to the Singapore Exchange last week that it was in preliminary discussions with prospective buyers.
The green light for any sale will hinge on agreement from GIC which holds a 36.9% stake. It is thought that GIC could retain its shareholding in GLP, entering a scheme of arrangement that would allow the buyer to take the remaining free float of 63% of GLP’s 4.7bn shares.
While GIC pushed for a strategic review of GLP last year, the institution has been working hard to increase its exposure to logistics real estate.
“We do not rule out the likelihood that a potential takeover could come in the form of a scheme of arrangement, in which GIC can retain its 37% stake in GLP,” Chang said.
A property securities fund manager told IPE Real Estate that any purchaser needed to be looking at offering at least SGD2.70 to SGD2.80 per share for a bid to be “palatable to shareholders”.
“Having CIC in the current consortium is the game changer,” he said. “Without CIC, it was always questionable whether the other members were financially credible.”
A potential obstacle for a CIC acquisition came late last year, when it was reported that Chinese regulators were to impose closer scrutiny on offshore investment by state-owned companies. But GLP, which has more of than half of its assets in China, might be a satisfactory target.
Chang said the Chinese government could be less inclined to view the potential privatisation of GLP as a “foreign investment”, which is what a takeover of GLP would be. Furthermore, he added, Chinese authorities could see GLP’s potential takeover as a strategic move for further control of domestic assets.
The chief executive of a regional logistics group said: “Various players have been working quietly behind the scenes to make sure that things are done methodically and properly. Honestly, I think a deal is ready – just waiting to be signed off.
“GLP is a listed company and all the relevant players, especially its largest shareholder [GIC] and its board, would want to ensure that they follow the proper processes.”
Regardless of the details, key industry professionals and property securities managers say they expect GLP to be delisted as early as middle of this year.