Sunday 4 October 2009
Consortium bids to snap up Sincere for $112.7m
Singapore’s largest watch retailer Sincere Watch has received a $112.7 million cash offer from a consortium largely made up of a unit of luxury group LVMH Moet Hennessy Louis Vuitton, a private equity arm of Standard Chartered, and former owner Tay Liam Wee.
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Consortium bids to snap up Sincere for $112.7m
Most of the money will help pay off Peace Mark’s debt to three banks
By JAMIE LEE
02 October 2009
(SINGAPORE) Singapore’s largest watch retailer Sincere Watch has received a $112.7 million cash offer from a consortium largely made up of a unit of luxury group LVMH Moet Hennessy Louis Vuitton, a private equity arm of Standard Chartered, and former owner Tay Liam Wee.
This was revealed in an advertisement of a voluntary conditional cash offer that the consortium took out in BT yesterday.
Because nearly all of the company - or 99.4 per cent of the company’s shares - were pledged to the three banks ABN Amro, BNP Paribas and ING Bank by Peace Mark as collateral for a US$500 million term loan to finance the acquisition for Sincere in 2007, most of the amount will go towards paying off the debt to the lenders that Peace Mark defaulted on.
The rest of the offer amount of under a million dollars will go to the minority shareholders owning the shares in the delisted firm.
Once Peace Mark defaulted on the debt, the three banks were effectively in control of the company.
It is unclear how the banks will demand repayment for the remainder of the loan, or whether they will be able to recover all of the loan offered out to Peace Mark.
The Hong Kong company was sold to Chow Tai Fook Jewellery - a prominent privately owned retailer - for HK$505 million (S$92 million) in November last year.
The trio of LVMH, Standard Chartered private equity and Mr. Tay will make up 78.9 per cent of the consortium, or 26.3 per cent each. This means that Mr. Tay - who received a hefty sum from the buyout by Peace Mark - will be paying less than $30 million.
BT understands that Mr. Tay is likely to help run Sincere, especially since the prized sole distributorship of Franck Muller watches depends heavily on the relationship between Mr. Tay and the brand owner.
The remainder of the stake will be taken by the three banks, with ABN Amro taking 10 per cent, BNP Paribas owning 2.75 per cent and ING Bank taking 7.25 per cent. The financial adviser for the deal, TC Capital, will own the final one per cent as payment for its services.
But given the term loan owed to the banks, their combined 20 per cent stake - representing $22.54 million - will be offset against the loan. This means that effectively, the lenders will receive $89.8 million in total after deducting the cost of their equity stakes.
The bid price - which translates to an offer of 54.8 cents per share - is just about 20 per cent of the $530 million that the Hong Kong company Peace Mark paid for Sincere in December 2007. Peace Mark was subsequently hit by financial difficulties and could not pay up its multi-million dollar debt to its lenders.
Peace Mark then went under provisional liquidation in September last year and the fate of Sincere has since been hanging in the balance.
The offer price of 54.8 cents also represents a 24.7 per cent discount to the company’s net asset value of the group at as March 31, 2008 at 72.8 cents.
Sincere has yet to pay out a dividend of $10.3 million promised in 2008. The lenders have agreed to accept the deferred dividend payout but hold first consideration of any future dividends paid out, up to $6 million.
Law firm Clifford Chance is advising Sincere Watch on the acquisition by the consortium.
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