DLF owners to buy out DE Shaw in arm

DLF owners to buy out DE Shaw in arm
The Economic Times, November 12, 2009, Page 1

Arun Kumar NEW DELHI

THE founding family of India’s largest real estate company has reached a deal with DE Shaw to buy out the hedge fund’s investment in DLF Asset (DAL), an important step presaging transactions that could lead to a Singapore listing for the DLF affiliate in the first quarter of 2010.

DE Shaw will get a little less than $500 million from KP Singh and his family, and privately-held DAL will most likely become a majority-owned subsidiary of listed property developer DLF, two persons directly involved in the transaction said.

DAL, which buys completed commercial assets from DLF, was set up as a Real Estate Investment Trust (REIT) controlled by the Singh family. A Singapore listing for DAL, which was to have happened in 2008, was shelved following the crash in the global equity markets.

The integration of DAL with DLF, which is expected to be completed by December, is being done to give the property developer access to the former’s revenue stream.

Mr Singh and his family have bought DE Shaw’s investment for around Rs 2,300 crore ($500 million). The hedge fund had invested $400 million, equivalent to Rs 1,600 crore, in early 2006.

The cash-strapped real estate developer, whose sales fell by over 50% to Rs 1,810 crore during the quarter ended September, has set itself a target of nearly halving debt to Rs 6,500 crore this fiscal year. Revenues from DAL, which at one time accounted for over a third of DLF’s sales, have dried up.

FLAT OUT

Deal Contours
As per the pact with DE Shaw, KP Singh and family will buy out its investment in DAL for around $500 m DLF is close to integrating DAL's operations with itself Following the deal, DLF is likely to list the company on Singapore Stock Exchange by the first quarter of 2010

Concrete Plan
Integration is aimed at bringing all the commercial assets under the DLF umbrella to ensure a certain revenue flow This would help DLF ring-fence itself from market uncertainties

Arm's Length
DAL is a wholly-owned Real Estate Investment Trust of the Singhs, floated to acquire DLF’s commercial properties It buys and manages commercial assets on the lines of REITS