What are the pros and cons of the proposed privatisation of Frasers Hospitality Trust?

Frasers Property Ltd (FPL) is planning to acquire all of FHT’s stapled units for $0.70/unit.

Frasers Property Ltd (FPL) is planning to privatise Frasers Hospitality Trust (FHT) by acquiring all of its stapled units for $0.70 per unit, but what could these mean for both parties?

For FHT, CGS CIMB said the proposed scheme will be beneficial to its existing unitholders since they can unlock value from the given scheme consideration which is “at a premium to the company’s book value.”

The transaction also bodes well for FPL to “increase its investment in hospitality assets and to leverage on its deep understanding of FHT’s assets and adopt a disciplined approach to drive performance,” said the analyst.

In terms of pro forma financial impact, however, CGS CIMB said the transaction might lead to a decline in FPL’s proforma FY21 earnings per share (EPS) before fair value change and exceptional items by 5.5%, and net tangible assets (NTA) by 1.3%.

Meanwhile, FLP’s net debt to equity ratio could increase by 5% pts.

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