CGS-CIMB Research analysts Lim Siew Khee and Eing Kar Mei see Singapore Press Holdings’ (SPH) termination of the Keppel Scheme as paving the way for a clearer and more straight-forward privatisation process.
This allows for shareholders to vote on the more superior Cuscaden offer, write the analysts in their Feb 10 note.
“We have already expected its deal to take SPH private to be off since the intervention by Cuscaden in November 2021,” they add.
SPH had announced its notice of the termination of the Keppel Implementation Agreement (KIA) with immediate effect on Feb 10.
See: Keppel set to commence arbitration proceedings against SPH
This follows consultation with the Securities Industry Council (SIC) which has had no objections to SPH exercising its termination right.
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The move is hot on the heels of Keppel Pegasus’ – a wholly-owned subsidiary of Keppel Corp – commencing arbitration proceedings against the media and property company for trying to walk away from its takeover offer.
According to the KIA, Keppel and SPH have the right to terminate the agreement immediately if any of the scheme conditions are not satisfied and if it has not become effective by Feb 2, which is the cut-off date.
Keppel, in August 2021, had proposed to acquire SPH’s non-media portfolio. Just when most market watchers thought the deal was done, a consortium called Cuscaden Peak made up of Hotel Properties, Mapletree and CLA Real Estate Holdings tabled a more attractive offer in October 2021.
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SPH’s reasons for exercising its termination right include: Cuscaden’s superior scheme, the removal of disparity in terms of timing and regulatory approval process between Cuscaden and Keppel’s schemes. Adding to this is that some of the conditions under the Keppel Scheme have yet to be satisfied by the cut-off date.
Christopher Lim, Group Executive Director of Hotel Properties believes that the latest SIC ruling allows SPH and Cuscaden to “move forward expeditiously to table the Cuscaden Offer for SPH shareholders to vote”.
“We have been steadfast in our commitment to deliver a compelling Offer to SPH shareholders and our implementation agreement with SPH remains in full force. The Cuscaden scheme, which offers the optionality of an all cash consideration or a cash and units consideration, provides an opportunity for SPH Shareholders to crystallise their investment in SPH at superior value,” adds Lim, who is also the spokesperson for Cuscaden.
“Any attempt to delay the Cuscaden scheme process goes against the interest of SPH Shareholders and deprives them of the opportunity to vote in favour of the Cuscaden scheme and receiving value in their investments promptly,” he stresses.
Against this backdrop, CGS-CIMB’s Lim and Eing have reiterated their “add” call on Keppel Corp, at a target price of $7.20.
“We believe the earnings impact from the arbitration could be immaterial for Keppel,” write the analysts, who add that the breakup fee of $34 million (4% of its FY022 earnings) was supposed to be borne by Cuscaden.
“However, Keppel’s share price could see a very short-term knee-jerk reaction, as with any negative newsflow from disputes,” they add.
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Furthermore, the medium-term outlook on Keppel’s asset monetisation and capital recycling into new growth sectors will not be affected by SPH’s decision, in their view.
Meanwhile, Lim and Eing have kept their “hold” call on SPH at a target price of $2.11.
As at 4.41pm of Feb 10, shares in Keppel Corp was up 3 cents or 0.50% at $6.07, while shares in SPH were flat at $2.33.
Cover image: Albert Chua/The Edge Singapore
