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Keppel's buyout offer for Keppel T&T 'fair and reasonable', says IFA

THE independent financial adviser for Keppel Telecommunications & Transportation (T&T) has found a buyout offer by parent company Keppel Corp to be "fair and reasonable".

Rothschild & Co has recommended that Keppel T&T shareholders vote in favour of the proposed scheme at a scheme meeting that will take place at 3pm on April 2, 2019, or sell their shares in the open market if they can obtain a higher price than what is being offered. Keppel T&T’s independent directors have accepted Rothschild's recommendation.

Keppel Corp is offering S$1.91 in cash for each Keppel T&T share it does not already own through the scheme. Keppel T&T shares closed at S$1.88 on March 8. If Keppel T&T shareholders reject the scheme, their company's shares will continue to trade on the Singapore Exchange.

The “fair and reasonable” recommendation was given due to the “low trading liquidity” of Keppel T&T’s shares, which Rothschild said had “generally been low” in the past 12 months prior to Sept 27, 2018, the joint announcement date of the acquisition and scheme, and March 1, 2019, the latest practicable date prior to the launch of the scheme document.

“The scheme represents a clean cash exit opportunity for shareholders to realise their entire investment without incurring brokerage and other trading costs, an option which may not otherwise be readily available due to the low trading liquidity of the shares,” Rothschild added.

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For the 12 months ended March 1, 2019, the average daily trading volume of Keppel T&T’s shares has been 0.3 million shares, and the average daily trading value has been about S$0.5 million. From Sept 27, 2018 to March 1, 2019, the average daily trading volume and trading value increased to 0.5 million shares and S$0.9 million respectively. Closing share prices meanwhile, traded between S$1.34 and S$1.89 in the three-year period up to March 1, 2019.

Rothschild said that the shares have also underperformed the Benchmark Index for the three-month, six-month, 12-month and 24-month periods up to the last trading day on Sept 21, 2018; and outperformed the Benchmark Index for the three-month, six-month, 12-month and 24-month periods up to the latest practicable date on March 1, 2019.

Keppel Corp has said that privatising Keppel T&T will allow more flexibility in allocating resources and capital in a “more efficient manner” without reporting requirements and compliance costs associated with the maintenance of its listed status. Keppel Corp is also looking to streamline its own corporate structure.

In addition, the move will allow Keppel Corp greater control and flexibility in granting Keppel T&T full access to its network and resources as it grows its data centre and urban logistics businesses.

Keppel Corp currently owns 79.09 per cent of the shares in Keppel T&T, which in turn owns 19.3 per cent of telco M1. Shareholders cautious of the prospects of M1 in the face of heightened competition will obtain a “clean cash exit” from Keppel T&T if the scheme becomes effective, the offeror has said.

Hence, shareholders who wish to realise their investment in cash may do so at a “premium to prevailing market prices” prior to the joint announcement date and without incurring brokerage fees.

Looking ahead, Keppel Corp said it intends to work with Keppel T&T’s management team to identify, develop and execute appropriate transformation strategies which, if successfully implemented, may enable Keppel T&T to better utilise its resources in achieving a different growth trajectory and profit performance.

Until a decision is made regarding this transformation, there is no intention to introduce any major changes to the business or operations of any group company, redeploy Keppel T&T’s fixed assets or attrition, other than in the ordinary course of business.

"However, Keppel retains the flexibility to consider, at any time, any options in relation to any group company which may present themselves and which it may regard to be in the interest of Keppel," the document added.

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