Benefits of SPH's media restructuring expected to outweigh S$356.8m cost involved: proxy advisory firm

Claudia Tan HS

Published Tue, Aug 31, 2021 · 09:50 PM

THE anticipated benefits of the Singapore Press Holdings' media restructuring will outweigh the S$356.8 million cost involved, said proxy advisory services company Glass Lewis.

"The company is effectively seeking to cut its losses from the media business, which we understand is likely to continue facing significant challenges over the coming years," said Glass Lewis.

SPH, which publishes The Business Times, announced its plans to transfer the media business to a not-for-profit company as part of a strategic review of its various businesses on May 6. SPH will provide the initial resources and funding by capitalising the media business with a cash injection of S$80 million, S$30 million worth of SPH shares and SPH Reit units, and SPH's stakes in four of its digital media investments.

With the SPH contribution from the company and the potential for public-private partnership funding, SPH expects the media business to be better positioned to sustain its operations and fulfil its social responsibility, noted the report.

In addition, hiving off the media business would mean that the company will no longer be exposed to the potentially significant and recurring losses and will be able to free up more working capital to fund its more profitable businesses, said Glass Lewis in a report.

While SPH had been successful in some respects in bolstering its digital offerings, monetisation remains a challenge given the competitive media business landscape. In addition, the growth in digital subscription and digital advertising has not been, and is not expected to be, enough to offset the decline in print-related revenues, said Glass Lewis.

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With advertising revenue expected to continue declining, SPH has increased its investments in digital platforms and implemented various cost control initiatives, said Glass Lewis.

"However, further investments will likely be needed to continue the digital transformation of the media business, and the company believes there is no further room to make material cost cuts without impairing the quality of its journalism."

SPH had also considered various options such as winding-up or a sale of the media business but they were not feasible.

The media restructuring is the first step in a strategic revamp that could result in the privatisation and sale of the rest of SPH to Keppel Corp in a deal which values SPH at S$3.4 billion. The proposed acquisition by Keppel is subject to SPH shareholders first approving the media restructuring plan.

Glass Lewis therefore said that the proposed restructuring is an initial step in the board's efforts to maximise shareholder value, given that the proposed restructuring will help pave the way for shareholders to be able to consider and vote on the scheme (the full-bid acquisition proposal from Keppel) at a future shareholder meeting.

SPH will hold a virtual extraordinary general meeting at 2.30pm on Sept 10 to seek shareholders' approval on its proposed restructuring and formation of a new constitution.

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