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Lippo said to be front runner, may use S’pore vehicle Auric Pacific in deal

(SINGAPORE) A new major shareholder is expected to emerge soon at Robinson, as OCBC nears a deal to sell its stake of up to 36 per cent in the retailer.

Sources say Indonesia’s Lippo Group, set up by Mochtar Riady, is the front runner - at least for now.

Market watchers suggest the price could be $7 per Robinson share or even higher. In the stock market yesterday, Robinson closed 10 cents lower at $6.45.

Assuming Lippo buys OCBC’s Robinson stake at $7 per share, and after stripping out the group’s investments and cash holdings totalling $218 million as at June 30, 2005 or $2.53 per share, it would be paying about 24 times Robinson’s pre-tax earnings from retail operations for the financial year ended June 2005.

Details are being worked out, including the vehicle Lippo will use to buy into Robinson and the size of the stake it will take.

One view is that it may acquire slightly more than 29 per cent - shy of the 30 per cent threshold that would trigger a mandatory takeover offer. OCBC Group, including its insurance units Great Eastern and Overseas Assurance, hold about 36 per cent of Robinson.

As for the vehicle that Lippo - which controls Indonesia’s largest retailer Matahari - will likely use to buy into Robinson, some market watchers suggest it could be Lippo’s Singapore-listed unit Auric Pacific, which is involved in the consumer and property businesses.

Lippo was one of four bidders that took part in a recent closed tender handled by Credit Suisse for OCBC’s stake in Robinson. The other three contenders were:

Tecity Pte Ltd, controlled by the family of the late Robinson and OCBC chairman Tan Chin Tuan, which already owns an under 5 per cent stake in the retailer.

PT Mitra Adiperkasa TBK, an Indonesian department and speciality store operator that is part of the Gajah Tunggal group.

A party from Dubai. Industry market watchers suggest the Dubai party could be members of the Al-Futtaim family, which has retail interests, or the Landmark Group, a retail group.

BT understands that Lippo will give an undertaking, even if it is not a legally binding one, that it will continue to operate the Robinson group’s established trade names - Robinsons, John Little and Marks & Spencer - and retain key staff.

Some industry observers think such an undertaking - to assuage concerns in some quarters about control of Singapore’s oldest retailer falling into foreign hands - may not be necessary. The thinking is that Lippo is probably looking to ride on Robinson’s historic trade names - not destroy them.

‘Robinson does not own its store space. So its main asset, other than cash holdings, is really its retail business including its established trade names and the service quality of its employees,’ said an experienced Singapore retailer.

‘It will be folly for Lippo or whoever the new investor is to destroy the trade names,’ he said. ‘Instead it will make good business sense to continue with the names and even grow them, may be bring them to Indonesia and other parts of Asia as offshoots of the original Robinson company in Singapore - unlike some of the copycat ‘Robinson’ stores that have sprouted in some parts of Asia.’

The view now in industry circles is that a foreign party taking the major shareholding in Robinson may not create a public relations nightmare for OCBC - unlike in 2003. Back then, the Robinson board - in anticipation of OCBC and GE divesting their shares, which amounted to a 38 per cent stake - announced a proposal to sell Robinson’s retail business. But some of Robinson’s long-time customers banded together to petition against this, and the scheme eventually fell through.

Such a problem is not expected this time around. ‘Just see how nobody batted an eyelid when Raffles Holdings sold its entire hotel business, including the historic Raffles Hotel along Beach Road, to US-based Colony Capital,’ said an observer. ‘And frankly, the shock effect of OCBC selling its stake in Robinson should be worn off by now. After all, it has been in circulation for more than two years now.’

Also, the Lippo Group and the Riadys are no strangers in the Singapore business scene. They have been stepping up their property presence here over the past couple of years. These interests include a substantial interest in 78 Shenton Way, bought in August 2004 and since renamed Lippo Centre, and a 55 per cent stake in the freehold 79 Anson Road office block acquired in January. Last month, Auric Pacific bought One Phillip Street in the Raffles Place area.

Lippo has also been investing in the Singapore residential market and has participated in all the high-profile land tenders in Singapore over the past year including the Business and Financial Centre and the Orchard Turn sites.

Source : Business Times - 17 Mar 2006