Winding up of media business may incur 'potentially heavy financial costs': SPH

Singapore

SINGAPORE Press Holdings (SPH) said on Thursday that winding up the media business may incur "potentially heavy financial costs", and any sale of the media business would also require regulatory approval.

This was in response to questions sent by shareholders on why the board did not consider selling or shutting down the media business, ahead of the extraordinary general meeting (EGM) to be held on Sept 10. SPH is seeking to get shareholders' approval on its proposed restructuring and formation of a new constitution.

SPH, which publishes The Business Times, had announced in May that it will be transferring its entire media-related business to a company limited by guarantee (CLG). This came as part of a strategic review announced in March amid structural changes that had severely disrupted the traditional business model, which relied on print advertising revenue.

With the loss-making media business hived off, Keppel had made a S$2.2 billion bid to privatise SPH's non-media business. The deal, which values SPH at S$3.4 billion, will take place through a scheme of arrangement, subject to SPH shareholders first approving its media restructuring plan.

On Thursday, SPH said that its contribution, including S$80 million in cash, is to assist with the operation and maintenance of the restructured media business. The amount was arrived at after considering various factors, including the potential funding requirements of the media business for the next few years.

BT in your inbox

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign Up

Sign Up

"Given the role of the media business in providing a public good and the critical role it plays in the provision of quality news and information to the public, winding up is not an option," said SPH.

SPH pointed out that all options for the media business require approval from the regulator, and the regulator has supported this option.

In addition, SPH's financial adviser Evercore forecasted that the future potential losses of the media business indicate Ebitda (earnings before interest, taxes, depreciation and amortisation) losses of between S$59.4 million and S$83.6 million per annum by FY2024.

As these losses are structural and expected to be recurring annually over time, there is the possibility of SPH incurring significant recurring annual losses for an extended period if it were to retain the media business, said SPH.

This could also significantly impact SPH's ability to fund growth and pay dividends, while diverting senior management team and resources away from other strategic initiatives and opportunities.

This supports Evercore's view that making the S$125.8 million financial contribution under the proposed restructuring is more favourable than having to bear the potentially significant and recurring annual losses of the media business going forward if the company were to retain the media business, said SPH.

SPH's shares closed flat at S$1.94 on Thursday.