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Keppel Corp makes $2.2 bil offer to acquire SPH's non-media portfolio; SPH valued at $3.4 bil

Felicia Tan
Felicia Tan • 5 min read
Keppel Corp makes $2.2 bil offer to acquire SPH's non-media portfolio; SPH valued at $3.4 bil
Upon the completion of the scheme, SPH will be delisted. It will then become a wholly-owned subsidiary of Keppel.
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Keppel Corporation has proposed to acquire the non-media portfolio of Singapore Press Holdings (SPH) for $2.2 billion on Aug 2.

This includes SPH’s businesses and assets such as its purpose-built student accommodation (PBSA) and senior living businesses, stakes in SPH REIT and its REIT manager, as well as its other development assets.

The move, which comes after the group proposed to spin off its media business into a not-for-profit entity on May 6, values SPH’s non-media business at $3.4 billion.

Keppel Corporation, through its wholly-owned subsidiary, Keppel Pegasus, will acquire all the issued and paid-up ordinary shares in the capital of SPH via a scheme of arrangement.

Under the terms of the scheme, shareholders will receive a total of $2.099 per share, which comprises 66.8 cents in cash, 0.596 issued units in Keppel REIT valued at 71.5 cents and 0.782 units in SPH REIT valued at 71.6 cents from a distribution in-specie by SPH.

The consideration represents a 16.2% premium over the one-month volume weighted average price (VWAP) of SPH’s shares as at July 30. It also represents a 11.6% premium to the last traded price of $1.88 per share on July 30 and a 21.4% premium to the three-month VWAP of $1.729 per share in SPH.

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Shareholders will also receive any final dividend declared by the board for the FY2021.

According to Keppel, the acquisition will boost its Vision 2030 plans, where it seeks to move beyond “a developer model to providing urban development solutions”.

The group adds that SPH possesses a “quality portfolio of businesses and assets which are strongly aligned with Keppel’s business”. The acquisition will also complement and strengthen three out of four focus areas for Keppel, which are Urban Development, Connectivity and Asset Management.

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The proposed acquisition would also allow Keppel to consolidate its existing ownership of M1 and the jointly-owned Genting Lane data centre.

Furthermore, the addition of SPH REIT’s assets under management (AUM) will potentially grow Keppel Capital’s pro forma AUM by about 27% to $47 billion from $37 billion as at end-2020.

Had the scheme been effective Jan 1, Keppel’s earnings per share (EPS) would have increased from 16.5 cents to 17.5 cents.

In a separate statement, SPH reasoned that the privatisation of the entire company is the “preferred solution” in which shareholders receive a better valuation outcome where the control premium is paid for the entire company.

The move also maximises value and minimises disruption for its shareholders, SPH adds.

The proposed transaction is expected to be completed by December and is subject to the approvals of Keppel’s and SPH’s shareholders at their respective extraordinary general meetings (EGMs).

Upon the completion of the scheme, SPH will be delisted. It will then become a wholly-owned subsidiary of Keppel.

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See also: SPH attempts to break out of resistance

Keppel will hold a remaining 20% stake each in both SPH REIT and Keppel REIT.

“The proposed acquisition of SPH is very much in line with Keppel’s Vision 2030, where we seek to grow Keppel’s business as a provider of solutions for sustainable urbanisation through organic and inorganic options. This is a rare opportunity to acquire SPH’s non-media portfolio, which fits very well with Keppel’s business and growth strategy,” says Loh Chin Hua, CEO of Keppel Corporation.

“Given Keppel’s business model and focus areas, we are uniquely positioned to enhance and unlock the value of SPH’s portfolio. The two companies are already close partners in businesses such as M1, Prime US REIT and the development of the data centre at Genting Lane in Singapore. The acquisition would allow us to reap further synergies between Keppel and SPH, and also allow Keppel to enter the fast-growing PBSA sector and accelerate our expansion in senior living,” Loh adds.

“The proposed acquisition is accretive to Keppel’s earnings on a pro forma basis and would boost our AUM as well as recurring income. We have said before that Keppel does not need to hold all of our current 46% stake in Keppel REIT. The utilisation of Keppel REIT units to partly satisfy the scheme consideration allows us to limit the impact to our gearing.”

SPH CEO Ng Yat Chung says, “The outcome is the result of a strategic review process that has taken place over many months. We took the first step with the Media Restructuring to ensure a sustainable future for the media business, while removing its losses from SPH. The next step was a thorough process to unlock and maximise value for all shareholders for the remaining company. With the privatisation offer from Keppel, shareholders now have an opportunity to realise the value of their SPH shares at a premium of 39.9% to the last traded price before the strategic review was announced.”

JP Morgan is the sole financial adviser and WongPartnership LLP is the legal advisor to Keppel Corporation. Credit Suisse is the exclusive financial adviser to SPH, while Allen & Gledhill LLP is its legal advisor.

Shares in Keppel Corporation closed $5.49 on July 30, while shares in SPH closed at $1.88 on the same day. Units in Keppel REIT and SPH REIT closed $1.20 and 91.5 cents respectively on July 30.

All four companies have called for a trading halt before market open on Aug 2.

Photo: SPH

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