SPH deal aims to improve asset values, ease shareholder pressure off media unit
Move will give company more room to seize growth opportunities, maximise shareholder returns and grow its bottom line, says chairman
Claudia Tan HS
Singapore
SINGAPORE Press Holdings (SPH) has proposed a restructuring that is intended to preserve and grow its media business, while allowing shareholders to realise more value from their holdings.
The proposed deal involves a transfer of the media business to a not-for-profit entity, in the form of a company limited by guarantee (CLG). This structure will allow any future profits from the media business to be reinvested into the media operations rather than be distributed to shareholders.
This will free the media business from the "expectations of shareholders for a fair financial return and regular dividends", said Lee Boon Yang, chairman of SPH, on Thursday.
SPH will have "greater financial flexibility to tailor its capital and shareholding structure to seize strategic growth opportunities across other businesses in order to maximise returns for shareholders", he added.
The remaining non-media assets will also be better valued by the market once the overhang from the currently struggling media business is removed, said SPH's chief executive officer Ng Yat Chung. These non-media assets consist of SPH's property, purpose-built student accommodation, aged-care businesses and other investments.
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The deal would also improve SPH's bottom line. On a pro forma basis, assuming the restructuring had taken place at the start of FY2020, loss per share after restructuring adjustments would widen to S$0.20 for the year, from S$0.07. This figure includes, however, the Jobs Support Scheme fund income attributable to the media business. Excluding this grant income, the loss per share would actually narrow: from a loss of S$0.08 to a loss of S$0.06.
On the same pro forma basis, earnings per share for H1 FY2021 ended February would rise from S$0.04 to S$0.05.
SPH, which publishes The Business Times, will transfer all its media-related businesses to a newly incorporated subsidiary: SPH Media Holdings.
The transfer covers all relevant subsidiaries and employees; the News Centre and Print Centre, along with their respective leaseholds; as well as all related intellectual property and information technology assets.
SPH Media will also receive an injection from SPH in the form of S$80 million in cash, S$30 million in SPH shares and SPH Reit units, and stakes in four digital-media investments.
SPH Media will eventually be transferred to a CLG. Unlike companies, CLGs do not have share capital or shareholders.
SPH has obtained support for this move from the Ministry of Communications and Information (MCI), which regulates SPH under the Newspaper and Printing Presses Act.
MCI said it agreed with SPH's assessment that the current media business model within a listed-company structure is not viable, and added it was prepared to support the CLG.
At a press conference on Thursday, Dr Lee said that operating as a CLG would allow the media business to be more sustainable as it would be able to receive support from the government as well as from public contributions "to help it to achieve its mission as a public information provider for Singapore". "So that would ensure that it would have a sustainable financial model for the future," he added.
The Creative Media and Publishing Union (CMPU), meanwhile, assured its members that collective agreements between SPH and CMPU remain valid.
The transfer of the media business is subject to SPH shareholders' approval at an extraordinary general meeting, expected to take place some time between July and August. Assuming all the necessary conditions are met, the transfer of SPH Media to the CLG could take place three to six months from then.
Should shareholders vote against it, the fallback plan will be for SPH to continue what it has been doing, with media as an integral part of the business, said Dr Lee in response to queries at the press conference.
SPH called for a trading halt on Thursday before the market opened. Its shares fell 1.1 per cent or S$0.02 on Wednesday to close at S$1.79. At that level, the company is valued at S$2.87 billion or 80 per cent of its book value.
Examples of non-profit media entities
MANY news organisations overseas operate under not-for-profit entities. Here are six examples:
1. The Guardian: The UK newspaper has been controlled by the Scott Trust since 1936.
2. Bertelsmann: The German media conglomerate is owned by the Bertelsmann Foundation.
3. Ouest-France: The leading daily in terms of circulation in France has been owned by a non-profit organisation since the early 1990s.
4. ProPublica: The US Pulitzer prize-winning site was created in 2008 as a public trust.
5. The Philadelphia Inquirer: The US newspaper is owned by the Lenfest Institute for Journalism.
6. The Tampa Bay Times: The US newspaper is owned by the Poynter Institute for Media Studies.
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