SIA returns to table with better offer for Tiger

Singapore

SINGAPORE Airlines (SIA) appears to be meeting Tiger Airways' long-term shareholders halfway as it tabled a revised offer of 45 Singapore cents per share to delist the struggling budget carrier, signalling however that this would be the final offer.

In an announcement to the Singapore Exchange on Monday night, SIA hiked its offer price by nearly 10 per cent from 41 cents previously, with the new offer representing a premium of 45 per cent over Tiger's last traded price of 31 cents on Nov 5 before the general offer was launched. The revised offer values Tiger at about S$1.125 billion.

This comes after the Securities Investors Association Singapore (SIAS) singled out the concerns of some of Tiger's minority shareholders and lobbied for an extension to the offer deadline as well for a sweeter deal.

Speaking to The Business Times on Monday night, SIAS chief David Gerald noted that some long-term minority shareholders had felt the original offer price could have been improved.

"We thank SIA for this revision. Tiger shareholders should give serious consideration to this revised offer," he added.

At the original offer close of Dec 28, SIA had only received an additional 18.76 per cent of valid acceptances. Together with its 55.8 per cent shareholding in Tiger, this raised SIA's stake to 74.5 per cent, including shares controlled by SIA's concert parties; falling short of the over 90 per cent threshold it needed in order for the deal to sail through. This prompted SIA to extend the close of the offer from Dec 28 to Jan 8.

In past letters to SIA, Mr Gerald has pointed out that SIA appeared willing to pay more when it acquired Temasek's 7 per cent stake in Tiger at 67.8 cents in 2013 and again when SIA paid 56.5 cents per share to beef up its stake in Tiger from 40 per cent to 55.8 per cent in 2014. In the case of the latter, the move made was possible by an earlier whitewash waiver granted by minority shareholders.

SIAS has also highlighted that a Tiger shareholder who came in at the IPO price and subscribed to all three rights issues undertaken by Tiger since then would have paid an average of 67 cents a share.

According to Mr Gerald, some 30-40 Tiger shareholders have reached out to SIAS to air their views, including some fund managers from overseas.

"Tiger's independent financial advisor (Maybank Kim Eng) and Tiger's independent directors had already recommended that shareholders accept the initial offer price of S$0.41, which we considered to be compelling based on the significant price premium," said SIA chief executive Goh Choon Phong in a statement. As part of the deal, Tiger shareholders can also subscribe to SIA shares at S$11.1043 per share to participate in Tiger's future growth.

"We are optimistic that with this final upward revision of the offer price, those shareholders who have not already accepted the offer will consider it favourably," Mr Goh added.

Tiger was listed on the Singapore Exchange in January 2010 at S$1.50, but its share price has languished under the S$1 mark since 2011 as the budget carrier found itself buffeted by headwinds.

Faced with overcapacity at home and loss-making units overseas, Tiger has embarked on drastic restructuring efforts in recent years which essentially saw it reversing earlier ambitious expansion plans. The budget airline has either divested or grounded its "cubs" in Australia, the Philippines and Indonesia as they continued to bleed losses, dragging Tiger into the red. Meanwhile, overcapacity in South-east Asia clipped Tigerair Singapore's wings, prompting it to slash under-performing routes, lease out surplus aircraft and cancel incoming aircraft in order to boost yields and load factors.

Under its portfolio strategy, SIA is pushing for closer cooperation between Tiger and SIA's medium/long- haul budget arm Scoot, as well as with other carriers within the group. The group reckons that being able to feed traffic across its two budget units - among other things - will put Tiger on stronger footing, especially as Tiger lags behind regional big boys AirAsia and Lion Air in scale.

SIA also believes that closer ties across the four airlines will benefit the broader SIA group, which is navigating a tough operating environment amid intense competition from budget carriers and full-service airlines.

The closing date for the offer has now been extended to Jan 22 at 5.30pm. Shareholders who had previously accepted the original offer will still receive the new offer price as long as the deal goes through.

Shares in SIA closed at S$10.99 on Monday, down 21 cents, while the Tiger counter ended the day's trading at 41 cents, unchanged.