Sats shareholders vote in favour of Worldwide Flight Services deal

SHAREHOLDERS of inflight caterer and ground handler Sats : S58 0% have voted in favour of the company’s plan to acquire Paris-based air cargo handler Worldwide Flight Services (WFS), with 96.8 per cent of votes cast for the proposed transaction.

This represented 626.9 million shares, said Sats, following an extraordinary general meeting held on Wednesday (Jan 18). Temasek, via its indirect wholly-owned subsidiary Venezio Investments, had provided an irrevocable undertaking to vote in favour of the transaction. The Singapore state investor holds 466 million shares, or 39.68 per cent of Sats, via the subsidiary.

Just 3.2 per cent of the total number of votes, representing 20.8 million shares, were cast against the deal. No party was required to abstain from voting on the ordinary resolution.

Sats’ acquisition of WFS is expected to cost the company S$1.8 billion, of which up to S$800 million is expected to be raised through a renounceable underwritten rights issue. Some S$700 million will be obtained through a term loan, plus S$320 million from the company’s internal cash balances.

With the shareholder approval, the proposed acquisition of WFS is now subject to requisite regulatory approvals. Sats expects the transaction to be completed by March or April this year.

The blockbuster deal has drawn scrutiny since plans were unveiled by Sats on Sep 28. The firm’s shares have fallen 24 per cent since then, closing at S$2.94 on Wednesday. This is 0.7 per cent or S$0.02 higher compared to Tuesday’s close.

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Sats had initially illustrated a potential raise of S$1.7 billion through a rights issue of 609 million new shares at S$2.79 each. The company took on a different tack following a more than 20 per cent plunge in its share price, with chief executive Kerry Mok expressing the need to reduce the size of any potential rights issue.

Had it gone with the potential plan set out in its Sep 28 announcement, the acquisition would have raised its earnings per share (EPS) for FY2022 by 78 per cent, from 1.8 Singapore cents to 3.2 cents. Its net profit on a pro forma basis would have risen from S$20 million to S$56 million.

Following the finalised funding plan, Sats revised the figures downward. Net profit rises from S$20 million to S$28 million instead, including amortisation of intangible assets. EPS rises from 1.8 Singapore cents to 1.9 cents – less than 6 per cent. The increased debt load – S$700 million under the term loan – raises interest expense, thereby reducing pro forma net profit, Sats explained.

The company had characterised WFS as a highly strategic, one-of-a-kind asset that will transform its portfolio with the prospect of creating an Americas-Europe-Asia-Pacific network with 201 cargo and ground stations in 23 countries.

“It is a clear demonstration that our shareholders recognise the strategic value and growth opportunities that this transformational deal will unlock for Sats and all of our stakeholders,” Mok, who is also Sats president, said on Wednesday of the shareholder approval. “We will be better positioned to provide our global customer base with end-to-end solutions, while securing a pathway to profitable growth and uplifting our home-market base in Singapore.”