SPH exercises termination right for Keppel offer, Keppel launches arbitration proceedings

Singapore Press Holdings (SPH) T39has decided to terminate Keppel Corp's BN4 implementation agreement relating to the latter's takeover offer, while pressing ahead with preparations for shareholders to vote on Cuscaden Peak's rival offer. This has prompted Keppel to file a notice of arbitration with the Singapore International Arbitration Centre (SIAC) to start arbitration proceedings against SPH.

In a filing to the Singapore Exchange late Wednesday night, SPH spelled out its rationale for exercising the termination right, flagging that not all the scheme conditions set out in the implemention agreement previously signed by Keppel and SPH have been satisfied, even as the cut-off date of Feb 2, 2022, lapsed. "Nor has the Keppel scheme been effective in accordance with its terms," SPH said, adding that the Securities Industry Council (SIC) has ruled it has no objections to SPH exercising the termination right.

SPH added that it will "continue with its preparations to allow shareholders to consider and vote on the Cuscaden scheme".

Keppel has been embroiled in a long-running takeover battle for SPH with Cuscaden, which is a consortium backed by Hotel Properties (HPL), businessman Ong Beng Seng, and 2 Temasek-linked entities, CLA and Mapletree.

In the filing, SPH also highlighted that the implied value of Cuscaden's offer is superior to that of Keppel's.

In November last year, Cuscaden upped the ante by making a revised offer of S$2.40 a share for SPH, comprising S$1.602 cash and 0.782 of an SPH Reit unit through a distribution-in-specie by SPH. This came after Keppel tabled a final offer - which in itself is a revision of an earlier offer - of 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.

As at Wednesday (Feb 9), the implied valuation of Cuscaden's offer is S$2.36 for an all cash consideration and S$2.361 for a combination of cash and SPH Reit units. Meanwhile, the implied valuation of the Keppel offer is S$2.318, below the S$2.33 that SPH's shares closed at on Wednesday .

As such, the termination of the Keppel scheme is "consistent" with the preliminary recommendation of SPH's independent directors, who have recommended that shareholders vote in favour of the Cuscaden scheme, and against the Keppel scheme, noted SPH.

SPH went on to point out that there is no longer a disparity in terms of timing and regulatory approval process between the two offers. On Dec 2, 2021, Cuscaden had received the regulatory approvals required and had waived its rights to walk away from its bid in the event of a material adverse effect.

In December, the SIC also threw out a clause in the implementation agreement with Keppel that restricts SPH from holding a scheme meeting for a rival offer within 8 weeks from the Keppel scheme meeting. The SIC ruling meant that SPH could hold a shareholders' meeting to vote on the Keppel offer and the Cuscaden offer on the same day.

Based on the various reasons, SPH said it "believes that it is in the interest of shareholders and other SPH stakeholders for the company to terminate the Keppel scheme. "This would allow shareholders to consider and vote at the scheme meeting in respect of the Cuscaden scheme as soon as practicable, and if the voting majority as required by the Companies Act is attained, allow the company to submit the Cuscaden scheme to Court for approval."

Meanwhile, in a separate filing to the bourse, Keppel said that its wholly-owned subsidiary, Keppel Pegasus, had received a letter from SPH on Jan 24, 2022, giving written notice of its intention to consult the SIC about the termination of the implementation agreement between Keppel Pegasus and SPH.

Keppel said: "Keppel Pegasus does not agree with SPH's attempted purported termination of the Keppel implementation agreement, and is of the view that SPH is obliged to continue with the implementation of the Keppel scheme in accordance with the terms of the Keppel implementation agreement." Keppel Pegasus has filed a notice of arbitration on Feb 9 with the SIAC to start arbitration proceedings against SPH relating to the dispute and to seek various reliefs against SPH, including specific performance of SPH's obligations.

Keppel went on to add that this is in accordance with the terms of the agreement, which provides for disputes to be resolved by arbitration administered by the SIAC.

SPH, for its part, said it would "vigorously defend its position in the appropriate forum".

Keppel added: "Notwithstanding the arbitration proceedings, the company will continue to pursue its Vision 2030 growth plans. The company does not expect the arbitration to have a material adverse effect on its operations and the financial performance of the group, and will provide further updates, as appropriate."

Justin Tang, head of Asian research at United First Partners, told The Business Times that Keppel's move came as a surprise to him. "It obviously must have been a bitter pill for Keppel to swallow. If you look at SPH's and SPH Reit's assets, there are some crown jewels," said Tang, adding that there are indeed many synergies between SPH's and Keppel's assets.

However, Phillip Securities senior analyst Terence Chua said that Keppel is unlikely to be pursuing the matter because SPH assets are valuable. The arbitration proceedings are necessary to protect the interests of Keppel's shareholders, he said. "Further, we believe it is Keppel's view that its offer to SPH shareholders is a compelling one, and should be put to SPH's shareholders for consideration. Doing so would not deprive SPH shareholders of the right to choose between the two offers on the table," he added.

Still, United First Partners' Tang said that Keppel's move appears to be a "losing battle" given that it is "quite clear" which offer is superior. With the arbitration proceedings against SPH, Tang is also expecting further delays to the already long-drawn takeover battle between Keppel and Cuscaden, which may upset some SPH shareholders.

In a separate filing on Wednesday, Keppel also announced that Keppel Offshore & Marine had landed contracts worth some S$250 million.

Shares in Keppel closed at S$6.04, up three cents or 0.5 per cent, on Wednesday. Shares in SPH shed one cent or 0.43 per cent to close at S$2.33.

READ MORE:

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