CDL & CDI ... Another Great Result

[BlackPeter]

My knowledge re MCK is quite limited (e.g. what do they want to get out of their CDI investment), but maybe this is the time to do a bit of research.

At this stage CDI seems to be for them a good place to store wealth under book value - and as long as this is what they want to do, things are unlikely to change.

Obviously - at some stage they might want to realise their wealth, and in this case I would see two sensible strategies for them:

1) Keep accumulating and launch at some stage a take over for the reminder. As soon as they own the company completely, they could sell it (or its assets) for its (higher) underlying value.

2) The other way to realise their wealth would be to increase liquidity in CDI shares. At this stage the demand is small, given that many investors just shy away from a share which is hard to sell, if they need the money. A well managed partial sale of their CDI holding (still maintaining their majority) could in my view increase demand and share value. I.e. they would get the money for the shares they sell plus an increased share price for their remaining holding.

Both options (take over or increased liquidity) sound like a win-win to me for everybody, but as long as MCK don't need their money, is patience (and enjoying the reasonable dividends) in my view the best strategy for minority share holders.

[GTM 3442]

Interesting thread.

But the ownership is confusing me.

There is MCK which owns and runs the Millenium/Copthorne/Kingsgate hotel chains in New Zealand.

It also owns (some of?) CDL, which is a New Zealand residential property developer.

On the NZX website, code CDI takes me to Code CDI - CDL Investments
On the NZX website, code CDL takes me to Code CDI - CDL Investments
On the NZX website, code MCK takes me to Code MCK - Millenium & Copthorne Hotels

Can some kind person clarify this for me - who owns what.

Thanks (scratches head)

[Snow Leopard]

Prior to 27-Jan-2006 (ie after this thread was born) what is currently
Millennium & Copthorne Hotels New Zealand Limited which has the code MCK

was called
CDL Hotels New Zealand Limited and had the code CDL

This owns about two thirds of the shares in
CDL Investments New Zealand Limited which has the code CDI.

Best Wishes
Paper Tiger

PS: Both CDI & CDL have 'prior history' but that is hopefully not relevant.

[Vaygor1]

Further to PT's post, the names used for the NZX listed company with the code CDI aka NZX:CDI are …...

CDL Investments Limited	Commonly used
CDL New Zealand Investments Limited	Registered name at the NZ Companies Office. Refer https://www.business.govt.nz/compani...mpanies/249046
CDI	NZX Stock Code and is also commonly used
CDLI	Used by the company itself in its latest announcement. Refer https://www.nzx.com/companies/CDI/announcements/277999
CDL	Used mistakenly by some to mean NXZ:CDI due to past history and its similarity to the names above. Example here that is definitely CDI http://www.propbd.co.nz/cdl-launches-prestons-park/ NZX:CDL is now NZX:MCK who own 2/3 of CDI.
CDLIL	Seen this at the odd time too.

Phew…

As PT alluded, CDI went by other names going back well over a decade now and under very different circumstances compared to today, and with different people (ratbags) in control; a checkered past that is clearly ancient history given the last 7+ years. Refer bottom 2/3 of my ST post about 20 months ago... http://www.sharetrader.co.nz/showthr...l=1#post491571 which refers to Chinese ownership but CDI via MCK is actually Singaporean owned by the Hong Leong group.

[Vaygor1]

My knowledge re MCK is quite limited (e.g. what do they want to get out of their CDI investment), but maybe this is the time to do a bit of research.

At this stage CDI seems to be for them a good place to store wealth under book value - and as long as this is what they want to do, things are unlikely to change.

Obviously - at some stage they might want to realise their wealth, and in this case I would see two sensible strategies for them:

1) Keep accumulating and launch at some stage a take over for the reminder. As soon as they own the company completely, they could sell it (or its assets) for its (higher) underlying value.

2) The other way to realise their wealth would be to increase liquidity in CDI shares. At this stage the demand is small, given that many investors just shy away from a share which is hard to sell, if they need the money. A well managed partial sale of their CDI holding (still maintaining their majority) could in my view increase demand and share value. I.e. they would get the money for the shares they sell plus an increased share price for their remaining holding.

Both options (take over or increased liquidity) sound like a win-win to me for everybody, but as long as MCK don't need their money, is patience (and enjoying the reasonable dividends) in my view the best strategy for minority share holders.

Both excellent options worthy of board consideration in my totally biased view.

I have a 3rd option. Lobby to the NZX to not renew their waiver in 1 year from now. The rules are the rules and are there for a reason (as are most waivers too).

CDI are not entirely blameless themselves. Their predicament is attributable in-part (or largely?) to MCK almost-constantly exercising their rights under the DRP scheme year after year. As we all know MCK and CDI's Board are closely aligned. Further to this Adrian Ho the now 10% shareholder is Singaporean as is the Hong Leong group the ultimate beneficiary of CDI's ownership via MCK. Ref https://www.business.govt.nz/compani.../shareholdings


Coincidence?

But regardless, why cant CDL undertake a bonus share issue to all public shareholders to put this right? They have broken the rules after all, excuses or not.

This would increase liquidity by virtue of the number of publicly held shares, and the positive publicity generated by undertaking the exercise which I am sure would attract headlines.

win win win.

[Vaygor1]

I don't think advocating DELISTING is going to make the shares MORE liquid.

Maybe I'm missing something, but if trading is halted, I think it may be a bit difficult to delist. It would however drive CDI to act.

How does this fix the problem?
All shareholders are treated equally. Any bonus issue will apply to ALL shareholders pro rata.
It really makes it worse since the majority shareholder would INCREASE, with a bonus issue, its overall percentage of shares held by virtue of that majority holding.
I think you are confusing free float shares as somehow being "public shares", and due special treatment.

Not so. A bonus share issue to public shareholders would be a very real option open to CDI, and may well be an approach that would benefit them… while potentially being perceived as an apt 'penalty' by NZXR and public shareholders.

What rules have been broken, by whom?

Rule 5.2.3 by CDI.
Refer https://www.nzx.com/companies/CDI/announcements/279703

CDI's 2014 Annual report states Adrian Ho owned 9.68% as at 28-Feb-2014
This means the breach would have occurred between 28-Feb-2015 and 4-Mar-2016.
CDI therefore have had well over 12 months to keep their eye on it, and potentially manage the situation, in which Adrian Ho has been under no obligation to make a SSH notice since his last disclosure on 12-Nov-2014 of 9.66%

[blackcap]

Could it be that they CDI are playing the long game with the intent to delist.... thereby MCK and Ho can pick up the remainder of the shares for a lot less than they currently could? I could be wrong but its up to CDI to choose to be listed or not is it not?

I do not see how the latest problem is on of CDI's though. They cannot control who buys and sells shares and if a member of the public wishes to purchase shares (Ho) then there is nothing CDI can do to stop him is there?

I do not think a bonus issue to "public shareholders" would be legal. In contravention of the companies Act. All shareholders would have to participate so that the shareholdings remain the same. What they could maybe do is pay a bonus dividend in shares to the "public shareholders" and pay the large holders in cash. That would rectify the 25% problem...

[GTM 3442]

Thanks to all for the responses. Much clearer now.

[Vaygor1]

Could it be that they CDI are playing the long game with the intent to delist.... thereby MCK and Ho can pick up the remainder of the shares for a lot less than they currently could? I could be wrong but its up to CDI to choose to be listed or not is it not?

They can delist with an exemption to their breach in place, and to correct my earlier statement, possibly even without it (which would surprise me). But either way, in order to do so, refer this recent case. http://www.nzherald.co.nz/business/n...ectid=11559804

NZX Listing Rule 5.4.1 states that: "An issuer may request ... by not less than one month's prior written notice to NZX, that it cease to be listed or that some or all of its securities cease to be quoted."

The NZX may impose the condition that shareholders are required to approve the transaction with only those holding 10 per cent or less of the company eligible to vote.

... which means, under the current circumstances, MCK and Adrian Ho are not allowed to vote to delist if NZXR so choose.

I do not see how the latest problem is on of CDI's though. They cannot control who buys and sells shares and if a member of the public wishes to purchase shares (Ho) then there is nothing CDI can do to stop him is there?

UPDATE.. I didn't really answer this question properly in my initial response Blackcap, so here is my update in brown text.

CDI can't control how many shares Adrian Ho buys, but the NZX can.. eventually.. if he buys too many… it's called a takeover.. but at some point long before a takeover, MCK and Adrian Ho will somehow need to be held jointly responsible to keep their combined shareholding under 75%…. surely?.

MCK (joined at the hip with CDI) are, and have been, in control of how many shares they own for a very long time. Via the DRP they could have started opting for cash instead of shares long ago. So now that they are in breach, I cannot see the point of having a rule if it is allowed to continue breached year after year with no penalty.

So for an ongoing breach, in terms of potential remedy involving a bonus share issue to minority shareholders…
… My understanding is it is quite possible, but happy to be corrected. There are 2 conditions:
1. The condition where those holding in excess of say 10% or their associated entities, consent to a bonus issue that excludes them, or
2. With sufficient notice in advance, notify those with a certain size of holding, or even notify a specific identity if their holding meets certain conditions, that they will not be entitled to participate. This would give sufficient time for the non-qualifying entity(s) to get out of the position that prevents them from participating.

This recently happened in ALF buying up small parcels (with 3 months notice) whether the small parcel holders liked it or not. i.e. Either expand your holding or lose it. I am reasonably sure (but not 100%) the same condition can be imposed in some fashion the other way around. i.e. qualifying for a bonus share issue.

I do not think a bonus issue to "public shareholders" would be legal. In contravention of the companies Act. All shareholders would have to participate so that the shareholdings remain the same. What they could maybe do is pay a bonus dividend in shares to the "public shareholders" and pay the large holders in cash. That would rectify the 25% problem...

I am not sure how the law might differentiate between 'public' and 'non-public' shareholders (as defined by the NZXR) in this respect, however my response immediately above is a method that does not make that differentiation. I don't think that MCK/CDI being forced to act in order to comply with the rules they agreed to upon listing would be illegal. Your scenario of cash to the big holders & shares to the minority holders would likely solve or alleviate the problem, as would BP's option 2 from yesterday.

Interesting topic. I welcome more light on it.

[blackcap]

1. The condition where those holding in excess of say 10% or their associated entities, consent to a bonus issue that excludes them, or
2. With sufficient notice in advance, notify those with a certain size of holding, or even notify a specific identity if their holding meets certain conditions, that they will not be entitled to participate. This would give sufficient time for the non-qualifying entity(s) to get out of the position that prevents them from participating.

This recently happened in ALF buying up small parcels (with 3 months notice) whether the small parcel holders liked it or not. i.e. Either expand your holding or lose it. I am reasonably sure (but not 100%) the same condition can be imposed in some fashion the other way around. i.e. qualifying for a bonus share issue.


.

The above points 1 and 2 are just not going to happen. MCK control the board and there is no way they would suffer unduly themselves to the benefit of the minority shareholders.
Nice in theory but in practice a no go.