The Lippo Group is looking to pare its stake in property group Overseas Union Enterprise (OUE) via a share placement of up to 52 million shares, which represents an interest of 26.5 per cent.

Going by the indicative pricing range given of $11.50-$14 per share, this values the placement at $598 million to $728 million.

The share placement comes months after Indonesia's Lippo Group paid $957 million to buy Malaysian tycoon Ananda Krishnan's stake in OUE, raising Lippo's control in the mainboard-listed property group.

The deal, at a purchase price of $11 per share, boosted Lippo's direct and indirect interests in OUE to around 88.5 per cent - of which some 37.32 per cent is held by its investment unit, Golden Concord Asia.

According to prior media reports, Lippo and Mr Krishnan could not see eye to eye over strategy and the future direction of OUE. In the past, the two parties were also embroiled in a legal battle over a failed satellite TV venture in Indonesia, which resulted in Mr Krishnan's subscription TV group Astro winning an award of some US$230 million against Lippo.

In the announcement on the Singapore Exchange yesterday, OUE advised shareholders to exercise caution, high lighting that there was no certainty that the placement would take place within the indicated range, if at all.

'Shareholders should note that this is only an indicative price range and remains subject to change, and the final sale price of the vendor shares and number of vendor shares to be placed will only be confirmed upon completion of the bookbuilding exercise in respect of the placement,' it said.

OUE also announced yesterday that it is adopting an annual cash dividend policy, which would dole out to shareholders annual dividends of at least 50 per cent of the post-tax profit earned by the group. This would be after making adjustments for fair value gains as well as accounting for the group's capital needs, expansion plans and other funding requirements.

'The company ... believes this policy is in line with the company's intentions to optimise returns to shareholders, enforce greater accountability to shareholders and allow for good balance sheet management,' OUE said.

Lippo's proposed share placement will take place concurrently with OUE's proposed cash call, which would see it issuing up to $200 million in convertible notes due 2015. The group said last week that net proceeds from the sale of the notes - which are convertible into new ordinary shares - will be used to buy hospitality, retail, commercial and/or residential land sites or properties for development in Singapore. According to the announcement, it is currently eyeing a property here.

'The property is an office tower complex in the CBD (central business district) area which we believe is suitable for redevelopment,' OUE had said.

The proposed acquisition and development will be financed by both internal resources and external borrowings, the company said.

Its shares fell 60 cents in trading yesterday to close at $16.90.

Source: The Business Times © Singapore Press Holdings Ltd. Reprinted with permission.