Lippo: No change in strategy for OUE

Group will continue to develop, manage prime landmark properties in region

It will be business as usual for Overseas Union Enterprise (OUE), even as Indonesia’s Lippo Group takes sole control of the property firm.

‘There will be no change to OUE’s strategy,’ Lippo told BT yesterday. ‘Leveraging on its hospitality experience, OUE will continue to develop and manage landmark properties in prime locations in Singapore and across the region.

‘Under Lippo’s stewardship, OUE will continue to focus on retail, commercial and residential developments, which will allow the group to achieve sustainable growth over the long term.’

Questions over OUE’s direction surfaced after it underwent a significant ownership change on Tuesday. Its major shareholder Lippo paid $957 million – or $11 per share – to acquire the stake of another major shareholder Usaha Tegas.

This raised Lippo’s direct and indirect interests in OUE to 88.52 per cent from 64.67 per cent. Lippo president Stephen Riady also became OUE’s executive chairman.

Lippo is controlled by the Riady family and Usaha Tegas by Malaysian tycoon Ananda Krishnan. Talk of tension between two of the region’s richest business groups have been making its rounds, as both parties got into a legal battle over a failed pay-TV tie-up in Indonesia.

Last month, Mr Krishnan’s subscription TV group Astro won an award of some US$230 million against Lippo.

Lippo did not say if differences with Mr Krishnan drove it to take over the latter’s stake in OUE. But it shared that the deal came about after Bank of America Merrill Lynch approached both parties ‘with an attractive and compelling proposal’.

Lippo added: ‘We have been in discussions since that time and believe that this transaction makes sense and will benefit all parties.’

It is tapping on internal funds and bank borrowings to raise the $957 million needed.

Yesterday, OUE’s share price dipped slightly by 18 cents or 1.5 per cent to close at $11.80. At this level, the price still exceeds the $11 which Lippo valued each additional share at. It also remains much higher than the closing price of $9.04 last Friday.

Lippo reiterated that the deal will ‘further strengthen its asset base in Singapore’. It has been active in the property market here even on its own, with residential projects such as Holland Collection and Centennia Suites under its belt. Its unit PT Lippo Karawaci is also the sponsor of Lippo-Mapletree Indonesia Retail Trust.

‘Lippo is very comfortable with Singapore and has always looked for opportunities to expand its presence here,’ said Chesterton Suntec International research and consultancy director Colin Tan.

He did not rule out a delisting of OUE – its free float just slightly exceeds 10 per cent. But this might not happen until Lippo ‘contemplates its next course of action,’ he said.

Source : Business Times – 11 Mar 2010