Unitech to buy Corporate Parks, likely to list it in Singapore

Unitech Ltd, India’s second-largest realtor according by market capitalisation, plans to buy 94.5% stake in Unitech Corporate Parks Plc (UCP), which is listed on the Alternative Investment Market of the London Stock Exchange.

Through subsidiary Nectrus, Unitech owns 4.52% of UCP, which builds office complexes for IT companies and intends to build real estate for retail and other commercial sectors.

Unitech promoters hold another 0.22% stake through another company called Fairway Advisory Services.

The realtor has offered to buy each UCP share at 31 pence, a premium of 22.77% to Monday’s closing price of 25.58 pence. After the announcement, the UCP stock had risen to 30 pence on Wednesday. It thus remains to be seen whether the Unitech offer is successful.

Sources say that, after buying the UCP stake, Unitech will list it as a real estate investment trust (Reit) in Singapore. “The last listing at Singapore was successful and thus they want to list it there. The leasing scene is anyway bad at present and S-Reit would look attractive later,” they added.   

Questions sent to Unitech went unanswered.

At present 36 crore shares of UCP have been issued. Its major shareholders are ABN Amro (20.7%), HSBC (global) (15.9%), Roveda Holdings (9.2%) and Morgan Stanley Securities (7.4%).
Analysts said the buyout is a positive for Unitech, though there would be an outgo of Rs 760 crore. “At this price (31 pence), the buy looks positive, though there will be an increase in short-term debt in Unitech’s books. But if they increase their offer, it would be a negative,” said a Mumbai-based analyst with a domestic brokerage.

The proposed buy back of UCP shares is in line with Unitech’s plans to spin off its infrastructure business into a separate company called Unitech Infratech Ltd. Post demerger, UCP will be part of Unitech Infratech, since their synergies match.
Though the merger is 6 months away, the debt will now be raised in Unitech’s books.

Param Desai, research analyst at Angel Broking, said, “In the long run it is a good proposition. The commercial segment will take at least another year to recover.”

UCP has a 60:40 JV with Unitech to develop six special economic zones and IT parks in India, spread across 21.4m sqft. It has constructed 5msft area and only 2.1 msft is leased property. UCP was listed in December 2006 at 1 pound per share and had raised euro 360 million, since the downturn the shares have been battered.