IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

Arun has over 15 years’ experience covering the Technology sector. During this time, he has worked with technology start-ups and as an equity analyst in investment banks and independent research firms. He was formerly a Technology Analyst for Canaccord Genuity, Altium Securities, Espirito Santo Investment Bank, Noble Group and Clear Capital. He has a dual Master’s degree in Financial Engineering and Industrial and Operations Engineering from the University of Michigan. He obtained his Bachelor’s degree in Mechanical Engineering from the Indian Institute of Technology, Bombay. He is also a CFA charterholder.

IPOs and Catalysts/Events

Cuscaden’s Revised Offer Options to End the Battle for SPH

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Global Equity Research Ltd

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<a href="https://www.smartkarma.com/entities/singapore-press-holdings-limited" target="_blank" data-smartkarma-citation="entities:9952:1" rel="noopener">Singapore Press Holdings (SPH SP)</a> announced a final and improved privatisation offer from <a href="https://www.smartkarma.com/entities/keppel-corp-ltd" target="_blank" data-smartkarma-citation="entities:12:1" rel="noopener">Keppel Corp (KEP SP)</a>. Keppel’s final offer bumps up the cash consideration 30% from S$0.668 cash per SPH share to S$0.868 cash per SPH share while keeping unchanged 0.596 <a href="https://www.smartkarma.com/entities/keppel-reit" target="_blank" data-smartkarma-citation="entities:192:1" rel="noopener">Keppel REIT (KREIT SP)</a> units per SPH share along with SPH distributing-in-specie 0.782 <a href="https://www.smartkarma.com/entities/sph-reit" target="_blank" data-smartkarma-citation="entities:5994:1" rel="noopener">SPH REIT (SPHREIT SP)</a> units per SPH share. Based on the last close price of Keppel REIT and SPH REIT, the total consideration is S$2.351 per SPH share, which is a 12.0% premium to the previous Keppel offer of S$2.099 per SPH share and a 12.0% premium to Cuscaden’s offer of S$2.10 cash per SPH share.As discussed in <a href="https://www.smartkarma.com/insights/sph-s-rival-offer-from-cuscaden" target="_blank" data-smartkarma-citation="insights:59774" rel="noopener">SPH’s Rival Offer from Cuscaden</a>, on 29 October, SPH received a competing privatisation offer from Cuscaden at S$2.10 cash per SPH share. Since the announcement, SPH has facilitated due diligence to obtain a revised proposal from Cuscaden.Keppel’s final offer requires SPH to hold its EGM and scheme meeting to vote on Keppel’s scheme by 8 December. Keppel has obtained all regulatory approvals and waived the MAC clause. SPH has recognised that Keppel’s final offer is superior to Cuscaden’s offer and will call for the scheme meeting.We previously noted that Cuscaden’s offer has greater certainty of value as it is all cash, eliminates the risk of changing REIT unit prices (Keppel REIT and SPH REIT) and does any require further shareholders' approval on the part of Cuscaden (Keppel’s offer requires approval from Keppel shareholders). However, since the announcement of Cuscaden’s offer, SPH REIT and Keppel REIT unit prices have increased by 4.6% and 1.8% respectively, increasing the combined value of the REIT units by S$0.047 per SPH share. SPH REIT also has a floor price due to the minimum chain offer price of S$0.964 per SPH REIT unit which Cuscaden is obliged to offer under its proposal. Crucially, the rising REIT unit prices had lifted Keppel’s previous offer ($2.15 at last close prices) above Cuscaden’s offer.  <div class="content-highlight">Keppel’s final offer is attractive in the context of SPH’s historical long-term multiples and share prices. Based on the SPH REIT and Keppel REIT traded prices since the announcement of Keppel’s previous offer, Keppel’s final offer implies a range of S$2.201-2.355 per SPH share. Under the terms of the final Keppel proposal, any competing offer by way of a scheme of arrangement must be signed by 16 November and any competing general offer must be announced by 1 December. Barring a material decline in the REIT unit prices, we think it will be difficult for Cuscaden to launch a more compelling all-cash offer. Overall, we think that Keppel’s final offer has a good probability to be the winning bid.  </div>

Singapore Press Holdings (SPH SP) announced a final and improved privatisation offer from Keppel Corp (KEP SP). Keppel’s final offer bumps up the cash consideration 30% from S$0.668 cash per SPH share to S$0.868 cash per SPH share while keeping unchanged 0.596 Keppel REIT (KREIT SP) units per SPH share along with SPH distributing-in-specie 0.782 SPH REIT (SPHREIT SP) units per SPH share. Based on the last close price of Keppel REIT and SPH REIT, the total consideration is S$2.351 per SPH share, which is a 12.0% premium to the previous Keppel offer of S$2.099 per SPH share and a 12.0% premium to Cuscaden’s offer of S$2.10 cash per SPH share.As discussed in SPH’s Rival Offer from Cuscaden, on 29 October, SPH received a competing privatisation offer from Cuscaden at S$2.10 cash per SPH share. Since the announcement, SPH has facilitated due diligence to obtain a revised proposal from Cuscaden.Keppel’s final offer requires SPH to hold its EGM and scheme meeting to vote on Keppel’s scheme by 8 December. Keppel has obtained all regulatory approvals and waived the MAC clause. SPH has recognised that Keppel’s final offer is superior to Cuscaden’s offer and will call for the scheme meeting.We previously noted that Cuscaden’s offer has greater certainty of value as it is all cash, eliminates the risk of changing REIT unit prices (Keppel REIT and SPH REIT) and does any require further shareholders' approval on the part of Cuscaden (Keppel’s offer requires approval from Keppel shareholders). However, since the announcement of Cuscaden’s offer, SPH REIT and Keppel REIT unit prices have increased by 4.6% and 1.8% respectively, increasing the combined value of the REIT units by S$0.047 per SPH share. SPH REIT also has a floor price due to the minimum chain offer price of S$0.964 per SPH REIT unit which Cuscaden is obliged to offer under its proposal. Crucially, the rising REIT unit prices had lifted Keppel’s previous offer ($2.15 at last close prices) above Cuscaden’s offer.  Keppel’s final offer is attractive in the context of SPH’s historical long-term multiples and share prices. Based on the SPH REIT and Keppel REIT traded prices since the announcement of Keppel’s previous offer, Keppel’s final offer implies a range of S$2.201-2.355 per SPH share. Under the terms of the final Keppel proposal, any competing offer by way of a scheme of arrangement must be signed by 16 November and any competing general offer must be announced by 1 December. Barring a material decline in the REIT unit prices, we think it will be difficult for Cuscaden to launch a more compelling all-cash offer. Overall, we think that Keppel’s final offer has a good probability to be the winning bid.  

Keppel’s Final Offer for SPH - Game, Set and Match?