Keppel says waiving its walk-away rights an extra plus for its SPH offer

KEPPEL Corporation on Tuesday (Nov 30) addressed fresh queries on the attractiveness of its final offer for Singapore Press Holdings (SPH) as the day for shareholders to vote on the offer draws closer.

In response to questions fielded by the Securities Investors Association (Singapore), or Sias, Keppel said its decision to waive its right to walk away from the offer is a deliberate decision to improve the attractiveness of the deal amid the bidding war with Cuscaden Peak.

In dropping the material adverse effects (MAE) clause, it eliminates the risk of Keppel walking away should SPH's financial condition worsen.

The clause remains in place for Cuscaden's bid for SPH for now, and its waiver will take effect only from the date its scheme document is despatched.

Based on market precedents, Keppel said, it is not common for an offeror with a MAE offer condition to waive it before shareholders have decided on the offer.

Keppel added that it is able to close the transaction more expeditiously than Cuscaden and provide the shortest time to pay-out by mid-January next year for SPH shareholders.

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The urgency to close the deal comes as uncertainty that arises from being the subject of a long-drawn takeover offer can have a "destabilising effect" on the target company.

"It distracts senior management, can affect staff morale and creates uncertainty for suppliers and customers," said Keppel.

For the offer to proceed, Keppel only has to obtain approvals from the respective shareholders of Keppel Corporation and SPH, and the sanction of the Singapore High Court.

The requisite regulatory approvals have already been obtained.

Keppel is "optimistic" that its shareholders will share its view on the proposed acquisition of SPH, and support the transaction at Keppel's shareholder meeting on Dec 9.

As Keppel's shareholders meeting will take place ahead of the SPH shareholder vote on the transaction, by the time the SPH shareholders vote on the offer from Keppel, it would be known whether the approval from Keppel shareholders has been obtained.

The Keppel scheme meeting will be held after Dec 8 due to a delay "arising solely from a specified event", SPH's board had said on Nov 25. 

The Cuscaden scheme is expected to be completed by February 2022, but its scheme meeting can proceed only if SPH shareholders vote against Keppel's offer at Keppel's scheme meeting.

Some SPH shareholders have flagged that it would be fairer and easier for them to decide on the 2 offers if both offers are allowed to be considered at the same time.

In response, Keppel said it had entered into an implementation agreement with SPH on Aug 2 and subsequently improved its offer in discussions with SPH.

As part of those discussions, SPH and Keppel had "agreed on certain contractual obligations" on the due process to be taken.

"Naturally, Keppel wishes to have the Keppel scheme meeting held as soon as possible in accordance with those contractual obligations imposed on both Keppel and SPH under the implementation agreement," it said.

As part of Keppel's deal, SPH shareholders will receive units of Keppel Reit that trades at a discount to net asset value (NAV).

Sias had questioned Keppel on the rationale behind this arrangement.

"Why are SPH shareholders asked to 'trade' their exposure to the current SPH assets for commercial properties owned by Keppel Reit? It would appear that Keppel Reit units are included in the consideration to help Keppel reduce the cash outlay for the acquisition," said Sias.

Keppel acknowledged that while this move helps the group reduce cash outlay, it also provides SPH shareholders with the "opportunity to hold the listed Keppel Reit units as an investment or monetise the holding as they deem fit, and according to their individual investment needs".

Keppel Reit is currently trading at around 5 per cent distribution yield and has consistently paid out cash distributions like SPH Reit.

SPH shareholders will also receive Keppel Reit units that are trading at 10 per cent discount to NAV, said Keppel.

Assuming the transaction had been completed on Jan 15 this year, the combined accrued distributions from Keppel Reit (for the period from July 1, 2020 to Dec 31, 2020) and SPH Reit (for the period from Sept 1, 2020 to Nov 30, 2020) would have been about S$0.03 per SPH share.

On Nov 16, Keppel reiterated that its offer for SPH, which publishes The Business Times, is "firm and irrevocable". It said the final consideration of S$2.351 per SPH share as at Nov 9 represents a compelling 57 per cent premium to SPH's undisturbed trading price on Mar 30.

Cuscaden Peak is offering each SPH shareholder 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 closed at S$2.33 on Tuesday, down 0.43 per cent or S$0.010.