CapitaMalls Asia: A Buyout Offer from CapitaLand
(4 pages of text)
On April 14, 2014, CapitaLand Limited, a Singapore-based real estate company, launched a voluntary conditional cash offer of SG$2.22 for each share (SG$3.06 billion in total) of its subsidiary commercial property development and management company, CapitaMalls Asia Limited (CMA). CMA’s principal business strategy was to invest in, develop, and manage a diversified portfolio of real estate used primarily for retail purposes in Asia. CapitaLand’s offer represented a 22.3 per cent premium over CMA’s closing price of SG$1.815 on April 11, 2014. The intention was to delist CMA and fully integrate it into CapitaLand.
As an investor in CMA, you are seeking a reasonable valuation of CMA based on its past financial performance and other relevant market information. You also need to compute the premium, net present value (NPV), and synergy of the acquisition.
This exercise can be used in an advanced undergraduate- or graduate-level course in corporate finance or financial management. After working through the exercise and assignment questions, students will have developed their ability to do the following:
- Compare a company’s performance against industry benchmarks.
- Apply various valuation models to determine a company’s share price.
- Analyze the premium paid to a company being acquired, the net present value enjoyed by the acquiring firm, and the synergy of the transaction
- Make recommendations to shareholders.
Singapore, Large, 2014
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