THE Securities Investors Association (Singapore) (SIAS) has raised the concerns of Tiger Airways' minority shareholders with Singapore Airlines (SIA), flagging that the minority shareholders feel SIA's offer price to delist and privatise the budget carrier is "not reasonable".
Earlier this month, SIA launched a conditional general offer for the shares it doesn't own in Tiger at 41 Singapore cents per share. It also included an option for Tiger shareholders to subscribe to SIA shares at S$11.1043 per share as an avenue to participate in Tiger's future growth.
The offer price of 41 cents per share represents a 32 per cent premium over the last traded price of Tiger's shares on Nov 5, the day before the announcement was made.
But, in a statement issued on Tuesday afternoon, SIAS highlighted that a Tiger shareholder who came in at the initial public offer (IPO) price of S$1.50 a share and subscribed to all three rights issues undertaken by Tiger since the IPO would have paid an average of S$0.67 a share.
"The offer price is 39 per cent lower than what long-term minority shareholders paid," wrote SIAS chief David Gerald. "This offer, the minority feels, is not reasonable."
Mr Gerald added: "While SIAS understands that the current market conditions are different, nevertheless, the minority shareholders' interest must be taken into account. Therefore, SIAS calls upon the board of Tiger Airways to carefully review the SIA offer to ensure that the minority is dealt with fairly."
In 2013, SIA - which currently has a stake of 55.8 per cent in the budget carrier - beefed up its stake in Tiger from around 33 per cent to 40 per cent by acquiring Temasek's 7 per cent stake in the budget carrier for some S$49.03 million, based on a price of S$0.678 per share.
At the time, SIA bought perpetual convertible capital securities (PCCS) which were later converted to shares at S$0.565 per share in 2014, raising its stake in Tiger further from about 40 per cent to about 56 per cent. It also participated in Tiger's rights issue around that time, giving the bleeding carrier a cash infusion.
Maybank Kim Eng Securities has been appointed the independent financial adviser (IFA) to evaluate the offer.
"A circular containing the advice of the IFA and the recommendation of the independent directors on the offer will be despatched to shareholders and PCCS holders in due course," Tiger said in response to a query from BT.
In his statement, Mr Gerald also advised minority shareholders to wait for the report from the IFA to determine the fairness of the offer.
At a briefing on Nov 6, SIA chief executive Goh Choon Phong described the offer as compelling, given the 32 per cent premium. He also stressed that the full integration of Tiger into the SIA group would reap improved operational and commercial synergies, putting the budget carrier in a stronger position for success. Citing Bloomberg data between Oct 23 and Nov 5, he pointed out that the offer price exceeds price targets by analysts covering the stock.
"SIA's offer is 37 per cent above our previous S$0.30 target price and values Tigerair at 20.3x FY17F price/earnings, while regional lower-cost carriers are trading at 4.7x-16.4x FY16F P/E," wrote RHB Invest analyst Shekhar Jaiswal in a report on Nov 9.
Analysts have also pointed out previously there may not be many who have held on to Tiger's shares throughout its turbulent ride, and that the premium is "richer" than other recent general offers, such as that of Malaysia Airlines (MAS). Khazanah Nasional paid a 13 per cent premium to take MAS private.
Tiger, which made its debut on the Singapore Exchange in January 2010, reached a peak of around S$1.58 in August 2010 and a low of 22 Singapore cents in October last year.
The beleaguered carrier has been trying to claw its way back to profitability as part of a major restructuring plan, which saw it divesting or shutting down bleeding overseas cubs in Australia, Indonesia and the Philippines.
Meanwhile, Tiger's Singapore unit, hit by an overcapacity overhang in the South-east Asian market, is working to boost yields and load factors. To better manage capacity, it has cut poorly performing routes, cancelled the nine aircraft that were due for delivery, and has leased out surplus planes.
Tiger and medium/long-haul budget carrier Scoot - which is wholly owned by SIA - have also been working more closely together to boost connecting traffic across their respective networks.
SIA has highlighted that closer ties between the two will not only benefit Tiger, but the broader SIA group as well, which is navigating a tough operating environment with intense competition from budget carriers and full-service airlines alike.
SIA's general offer is conditional on the group owning over 90 per cent of the budget carrier by the close of the offer.
SIA shares closed five cents higher at S$10.74 on Tuesday, while the Tiger counter closed at 40.5 cents, unchanged.