BT Explains: Why SPH shareholders who want Cuscaden's offer need to vote at both scheme meetings

THE battle to take control of Singapore Press Holdings (SPH) has heated up this month, with the key offerors interested in the company raising the stakes in their revised offers for the group.

On Monday (Nov 15), the consortium comprising Hotel Properties (HPL), businessman Ong Beng Seng, and two Temasek-linked entities, CLA and Mapletree raised its offer for SPH by giving shareholders the option of an all-cash offer of S$2.36, or S$2.40 per share comprising S$1.602 cash and 0.782 of an SPH Reit unit through a distribution-in-specie by SPH.

SPH has said that this consideration is a superior offer to Keppel Corp's revised final offer - which is S$2.351 per share, consisting of S$0.868 per share in cash, 0.596 of a Keppel Reit unit and 0.782 of an SPH Reit unit - made last week.

Independent directors of SPH, which publishes The Business Times (BT), have preliminarily recommended that shareholders vote against the Keppel scheme and vote in favour of the Cuscaden scheme, subject to the independent financial adviser's opinion and the absence of a superior competing offer.

Shareholders should note that voting for the schemes is not concurrent. The scheme meetings will take place sequentially, and shareholders will be voting on Keppel's scheme first.

Why is voting at Keppel's scheme necessary?

Under the implementation agreement with Keppel Corp, SPH must hold a scheme meeting to get shareholders' votes on Keppel's proposed scheme of arrangement.

This is even though the SPH directors are not recommending shareholders vote in favour of the Keppel offer, SPH chief executive officer Ng Yat Chung said during a briefing on Monday.

When asked if the Keppel scheme meeting could be called off, Ng said that the ultimate decision would be for Keppel to take, but they are still committed to the meeting, and he has not received any indication that has changed.

"I apologise if it's a bit inconvenient for shareholders... we are where we are today, because at any one time, the company wants to put the best available offer on the table for the shareholders."

The Keppel scheme meeting is scheduled to be held by Dec 8, and its proposed privatisation of SPH via a scheme of arrangement requires at least 75 per cent of the total number of votes cast by SPH shareholders in person or by proxy at this scheme meeting.

If shareholders vote in favour of this, the Keppel scheme would proceed, and shareholders would receive their combination of cash, SPH Reit units and Keppel Reit units. SPH would be owned by Keppel and delisted.

"If you prefer the revised Cuscaden proposal, then you must first vote against the final revised Keppel proposal at the Keppel scheme meeting," said Ng. "I want to emphasise that if the Keppel revised scheme meeting is passed, then there would be no opportunity to vote for the Cuscaden scheme meeting."

Analysts that BT spoke with have said that the revised offer from Cuscaden is superior, but they also noted that shareholders need to vote accordingly.

UOB Kay Hian analyst Llelleythan Tan observed that there is still a risk that a majority of SPH's shareholders may approve the Keppel scheme on Dec 8.

CGS-CIMB analyst Eing Kar Mei added that shareholders of SPH would hence need to make sure they vote in the meeting.

Travis Lundy of Quiddity Advisors, who publishes on Smartkarma, noted that if enough people say no, the Keppel scheme - which requires 75 per cent approval - won't go through, and he added: "I see this as a small risk, not a big risk."

What comes after the Keppel scheme is voted down?

If shareholders vote down on the Keppel scheme in December, the Cuscaden scheme can be convened, and the current timeline has scheduled this for January next year.

Shareholders would have to vote to approve the proposed privatisation of SPH by Cuscaden via a scheme of arrangement, and an approval threshold of 75 per cent of the total number of votes cast at the scheme meeting is required.

If the Cuscaden scheme is voted through, each shareholder would then be able to elect for either the all-cash consideration or the cash and units consideration. The default election for shareholders is the cash and units consideration.

Should shareholders vote down the Cuscaden scheme in January, SPH would remain a listed entity.

Shareholders who want the Cuscaden scheme to succeed would hence need to exercise their votes at both the Keppel scheme meeting in December, and the Cuscaden scheme meeting in January.