TOP Global's difficulty in selling Singapore residential units within a regulatory timeframe has led executive chairwoman Oei Siu Hoa to launch a privatisation offer to avoid paying penalties.
Ms Oei, who also goes by Sukmawati Widjaja, is offering to buy up the rest of the property and education group she does not own for 33 Singapore cents per share.
Made through private investment vehicle SW International Holding, the offer represents a 50 per cent premium to Top Global's pre-announcement closing price of 22 Singapore cents, and values the company at about S$106 million. The offer is final and will not be revised.
Ms Oei, who is the younger sister of prominent investor Oei Hong Leong, has secured irrevocable undertakings that would take SW's stake to about 77.4 per cent of Top Global's total issue share capital. Ms Oei intends to delist Top Global if she is able to secure a stake of at least 90 per cent.
Top Global's difficulty in selling units at its E Maison, R Maison and The Quinn residential projects was cited among the reasons for wanting to take the company private.
Under Singapore's qualifying certificate (QC) framework, "foreign developers" - which practically includes all listed developers since they almost certainly have at least one foreign shareholder - have five years to complete a project, and two years after the building is ready for occupancy to finish selling the units. Failure to do so will incur extension charges of 8 per cent of the land purchase price in the first year, 16 per cent in the second year and 24 per cent thereafter.
The QC deadline for the Maison projects, which sits in the Braddell neighbourhood, is March 2018; Top Global bought the sites for the Maison projects for a total of S$97.6 million in 2011.
Top Global said that 40 per cent of E Maison and 20 per cent of R Maison remain unsold.
Incurring those penalties would be particularly difficult for Top Global which is already paying a price for unsold units at the Quinn.
Top Global announced on Tuesday that it had sold the final 17 units of The Quinn on Bartley Road to four wholly owned subsidiaries of Top Global for S$25.29 million.
The deal saves Top Global some money on two fronts. First, it will avoid QC charges on the Quinn.
More immediately, Top Global will not have to pay 10 per cent additional buyer stamp duty (ABSD), plus 5 per cent simple interest per year, for failing to finish selling the Quinn by this year. Top Global bought the two sites on which The Quinn sits for S$84.8 million in 2012, which would imply an ABSD of about S$10.6 million.
Instead, Top Global and its subsidiaries now face buyer stamp duties and additional buyer stamp duties on just the transacted units, which would work out to S$4.46 million.
If those subsidiaries sell those units over the next three years, however, Top Global will still be liable for seller's stamp duty. That potential cost combined with S$52.6 million of bank loans due in March 31, 2018 makes it difficult for Top Global to stomach any QC charges, the offeror said.
"If the company is not privatised, the offeror believes that, in the event market conditions continue to deteriorate and the company is unable to sell the remaining unsold units of E Maison and R Maison and the company makes further losses from sales of units in the Quinn by the relevant subsidiaries as aforesaid, the company may be required to seek alternative avenues of funding."