Accordia Golf Trust’s sponsor offers to buy golf courses for S$804.1m

063020 - Accordia Golf Trust Sponsor buy Golf course in Japan
A golf course in Tokyo. “Given the dearth of buyers of Japanese golf courses out there, and the general weakness of Reits and trust assets in Japan, I don’t expect others to show up, so I expect no bump and no competitive bid,” says Travis Lundy, an analyst who publishes on Smartkarma. 

Updated from : The Business Times30 Jun 2020

THE sponsor of Accordia Golf Trust (AGT) has proposed to acquire the trust’s 88 golf courses in Japan for 61.8 billion Japanese yen (S$804.1 million), or an implied purchase consideration of S$0.732 per unit, AGT said on Monday.

The price represents a premium of 5.1 per cent and 12.9 per cent over, respectively, AGT’s adjusted net asset value of S$764.9 million and adjusted net tangible assets of S$712.3 million as at March 31.

The price also represents a premium of 21.8 per cent over the volume weighted average price of AGT units in the one month to, and inclusive of, Nov 27, 2019.

That was the day before AGT announced that it had received a non-binding proposal to buy over AGT’s interests in all of its golf courses.

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Sponsor Accordia Golf plans to acquire all membership interests in, and assume the debts of, Accordia Golf Asset Godo Kaisha (SPC), which holds the golf courses. AGT will thus receive the full consideration of S$804.1 million from Accordia Golf and will not need to apply any of this amount towards the repayment of the SPC’s debts.

AGT said it intends to distribute the net proceeds from the proposed divestment via special distributions, after setting aside fees and expenses that are expected to comprise up to 3 per cent of the S$804.1 million purchase consideration.

The special distribution will be paid in two tranches. The first, comprising 92 per cent or 56.9 billion yen, will be paid within 25 business days after Accordia Golf pays AGT.

If there are no claims by Accordia Golf against AGT, another 5 per cent that had been set aside for potential claims will be paid out later.

It will not be meaningful for AGT to maintain its listing on the Singapore Exchange (SGX) after the asset sale, the trustee-manager said, as AGT will cease to have any operating business and will be deemed a cash trust.

As such, the trustee-manager intends to undertake a voluntary winding up of AGT.

The proposed acquisition is conditional upon approval from AGT unitholders by Sept 14, at an extraordinary general meeting (EGM) that will be convened in due course.

Sponsor Accordia Golf, which holds 28.85 per cent of all units in AGT and 49 per cent of the shares of the trustee-manager, will abstain from voting on the matter.

CIMB Bank has been appointed as the independent financial adviser (IFA) for the purposes of the proposed divestment as an interested person transaction. The IFA’s opinion will be set out in a circular to be despatched to unitholders in due course.

AGT’s independent committee said on Monday that AGT’s trading volume on the SGX has been historically low, so a divestment will enable unitholders to realise value for their units.

AGT has not made any acquisitions to drive growth since its listing, they added. While SPC had from time to time evaluated suitable golf course acquisitions, it was difficult for SPC to raise accretive financing to make the acquisitions. Consequently, the independent committee said, SPC had never proposed any acquisitions to the trustee-manager.

“AGT may face further difficulty in obtaining financing for golf course acquisitions (as a result of the Covid-19 outbreak), limiting AGT’s ability to improve its distribution per unit (DPU),” AGT said in a statement.

Accordia Golf also noted that AGT’s historical DPU has fallen over time.

Hibiki Path Advisors, the largest minority unitholder of AGT with a 7.2 per cent stake, told The Business Times on Monday: “At our first sight we are not impressed with the offer price of S$0.732 and are exploring the details announced by AGT.”

AGT had said in December last year that Accordia Golf’s indicative offer for the golf course holding company was 63.2 billion yen (S$781 million at the time), or roughly S$0.71 per unit.

Monday’s offer was lower in yen terms, but the yen has also strengthened against the Singapore dollar since then.

AGT also declared a S$0.0169 distribution on June 11, which was paid on Monday. And it has promised to pay an additional 1.2 billion yen or roughly S$0.0142 per unit in operating reserves to unitholders at a later date.

AGT said that the offer submitted by Accordia Golf was the only definitive offer it received. While a third party bidder had undertaken extensive due diligence on AGT and its golf courses, this party eventually decided to withdraw from the process due to, among other reasons, the Covid-19 outbreak and its effect on the golf course industry, AGT said.

Travis Lundy, an analyst who publishes on Smartkarma, said: “Given the dearth of buyers of Japanese golf courses out there, and the general weakness of Reits and trust assets in Japan, I don’t expect others to show up, so I expect no bump and no competitive bid.”

AGT had called for a trading halt on Monday morning before the offer was announced. The units last changed hands at S$0.64 last Friday.

There has been speculation over AGT as a privatisation candidate ever since South Korean private equity firm MBK Partners acquired its sponsor and golf course operator Accordia Golf in 2016.