Axiata caught in a bind as it mulls future of its investment in M1

Singapore

MALAYSIAN wireless giant Axiata Group Bhd is caught in a bind as it weighs whether to exit its decade-long investment in Singapore operator M1 Ltd.

Axiata, M1's biggest shareholder, has less than three weeks left to decide whether to tender its stock into a takeover offer valuing the target at S$1.9 billion. The Malaysian company held a board meeting last week to discuss the merits of the bid from Keppel Corp and Singapore Press Holdings Ltd, according to people with knowledge of the matter.

Axiata sees that there isn't enough time left to pull together its own counter-offer, the people said. The Malaysian company also considers it unlikely that a rival bidder will emerge at this point, one of the people said. Still, Axiata plans to wait until close to the Feb 18 deadline before making a final decision to accept, the person said, asking not to be identified because the information is private.

"From the way it has played out, it's clearly something that they are considering, and they probably don't want to be antagonistic," said Jin Rui Oh, a senior analyst at United First Partners in Singapore. "It's not a lose-lose situation for them, since this goes towards paying off debt on their balance sheet."

Ultimately, Axiata may have little choice which path to take. Keppel and SPH have a waiver from the Singapore bourse allowing them to take M1 private if the free float falls below 10 per cent. If Axiata rejects the offer, it could get stuck holding 28.7 per cent of an unlisted company languishing in last place among Singapore's wireless carriers.

Keppel and SPH, which hold a combined 32.8 per cent of M1, said last week that they won't increase their bid of S$2.06 per share "under any circumstances whatsoever". They extended the closing date for the offer by two weeks to Feb 18, giving investors more time to consider tendering their shares.

"Given the sensitivity of the timing of the situation, and that whatever we state may unnecessarily influence the market or be misconstrued, we will not be commenting," Axiata said in a statement in response to queries.

Axiata management has already had a first chance to say what they think of the offer. Last week, M1 board members urged investors to accept the current offer after an independent financial adviser declared the terms "fair and reasonable". Axiata CEO Jamaludin Ibrahim, the Malaysian company's representative on the M1 board, was among the independent directors recommending the offer.

Things were looking a lot rosier for Axiata just a couple years ago, when it was working together with M1's two other major holders to solicit bids for the company. At the time, M1 attracted interest from China Broadband Capital, Chinese coal miner Shanxi Meijin Energy Co and Singapore Internet provider My Republic Ltd. The plan was abandoned four months later after potential suitors dropped out. BLOOMBERG