SPH to transfer media business to not-for-profit entity

Claudia Tan HS

Published Thu, May 6, 2021 · 02:33 AM

SINGAPORE Press Holdings T39 said on Thursday it will be transferring its media business to a not-for-profit entity, amidst the ongoing challenge of falling advertising revenue.

The media and property group, which publishes The Business Times, said the move comes as part of a strategic review announced in March.

Under the exercise, the entire media-related business of SPH will be transferred to a newly incorporated wholly-owned 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 will also capitalise SPH Media with a cash injection of S$80 million, S$30 million worth of SPH shares and SPH Reit units, as well as SPH's stakes in four of its digital media investments.

SPH Media will eventually be transferred to a not-for-profit entity "for a nominal sum". The not-for-profit entity will be a newly formed public company limited by guarantee (CLG), with more information to be announced in due course.

Under the not-for-profit structure, profits from the media business will be reinvested into media operations rather than 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. CLGs are registered with the Accounting and Regulatory Authority of Singapore (ACRA) and governed by the Companies Act and is usually set up by non-profit organisations requiring a corporate status. Unlike companies, it does not have share capital or shareholders.

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The value of the SPH contribution is S$351.3 million. This is based on the net asset value of the companies and shares to be transferred to the not-for-profit entity, as well as key leases being taken at market value of S$147 million as at end-August last year. Assuming the key leases were valued at net asset value end-February, the contribution value would be S$252.3 million.

SPH said the contribution was arrived at after considering various factors, including the potential funding requirements of the media business for a few years.

On a pro forma basis, assuming the restructuring had taken place at the end of FY2020, SPH's net tangible assets per share would have fallen to S$1.82 from S$1.98 after the proposed restructuring. Loss per share after restructuring adjustments would widen to S$0.20 for the year, from S$0.07, had the proposed restructuring been effected at the beginning of FY2020.

The transfer of the media assets to the CLG is subject to SPH shareholder approval at an extraordinary general meeting (EGM) to be convened at a later date. SPH said the Ministry of Communications and Information, which regulates SPH under the Newspaper and Printing Presses Act (NPPA), has indicated its support for the restructuring.

The EGM for shareholder approval is expected to take place some time from July to August this year. Assuming all the necessary conditions are met, the transfer of SPH Media to the CLG could take place three to six months thereafter.

SPH said in a statement: "The media industry has faced unprecedented disruption in recent years. SPH's operating revenue has halved in the past five years due largely to a decline in print advertising and print subscription revenue."

SPH said its media business plays a critical function in Singapore with the provision of quality news and information to the public, in particular in the vernacular languages.

"Given this public role, winding up the media business or selling it off are not feasible options," SPH said. "However, remaining part of a publicly listed company where it is subject to expectations from shareholders of profitability and regular dividends is no longer a sustainable business model."

It said a not-for-profit structure that allows SPH Media to seek funding from a range of public and private sources, with a shared interest in supporting quality journalism and credible information, is "the optimal solution".

SPH said many news organisations overseas are operating under such structures, including The Guardian in the United Kingdom, which has been controlled by the Scott Trust since 1936; and the Tampa Bay Times in the United States, which is owned by the non-profit Poynter Institute.

Dr Lee said: "With the resources that SPH is providing upfront and the prospects for public-private partnership funding going forward, we anticipate that SPH Media will have a more sustainable financial future."

After the transfer of SPH Media to the CLG, SPH will no longer be subject to shareholder and other relevant restrictions under the NPPA.

Dr Lee added: "The exercise will give SPH greater financial flexibility to tailor its capital and shareholding structure to seize strategic growth opportunities across the other businesses in order to maximise returns for shareholders."

Addressing reporters at a press conference on Thursday, Dr Lee said that shareholders should understand that SPH had benefited from media operations for "most of the 37 years", where the media business had been a main contributor.

"So it's not wrong to ensure that if we are restructuring media, that media should receive start up grants from the parent company to ensure that it can take off into the future," he said.

On whether there are future plans to inject more funds into the CLG, Dr Lee said: "That is not our intention, this is a restructuring process where SPH media will be transferred over to the CLG and they will then strike out on their own together with the capitalisation that we have provided."

He is, however, not ruling out the possibility of the listco making a "public spirited contribution" in the future.

On what will happen if the restructuring is not approved by shareholders, Dr Lee said that the fallback plan will be for SPH to continue what it has been doing, with the media as an integral part of the business.

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.

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