With rival offer for SPH, analysts not ruling out bidding war

SINGAPORE - Keppel Corporation may have to raise its offer for Singapore Press Holdings (SPH) following a competing bid, say analysts, who note that SPH shareholders will get more price certainty from the rival bid.

The offer from Cuscaden Peak to acquire SPH at $2.10 per share in cash, estimated at $3.4 billion in equity value, came before the stock market opened on Friday (Oct 29).

Cuscaden Peak is a consortium that is 40 per cent held by Tiga Stars, a unit of businessman Ong Beng Seng's Hotel Properties Limited (HPL); 30 per cent held by Temasek unit CLA Real Estate Holdings; and 30 per cent held by the Mapletree group, also Temasek-linked.

In August, SPH received a privatisation offer from Keppel at $2.099 per share, valuing SPH at $3.4 billion, with Keppel's share of the deal totalling $2.2 billion. This comprises cash of 66.8 cents per share, 0.596 Keppel Reit units (valued at 71.5 cents) and 0.782 SPH Reit units (valued at 71.6 cents) per share.

KGI Securities investment analyst Joel Ng said the Cuscaden offer, while "not much superior to the Keppel offer, is a possible alternative for SPH shareholders to consider".

United First Partners' head of Asian research Justin Tang said the new bid appears to be a better offer being all cash, without shareholders having to take on the real estate investment trust (Reit) units.

Rafflesia Holdings chairman Mano Sabnani said the all-cash offer removes the uncertainty of fluctuating Reit prices, which is unfavourable to minority shareholders.

"Some minority shareholders of SPH were not happy with Keppel's offer, which involved units of Keppel Reit and SPH Reit, and they were prepared to sell their SPH shares at a loss to avoid getting saddled with odd lots of the Reits. So the new offer is a welcome alternative for them," he added.

Corporate governance advocate Mak Yuen Teen of the National University of Singapore (NUS) said the Cuscaden offer is not superior to Keppel's in terms of price, but the all-cash offer does provide more price certainty for SPH shareholders.

"Under the Keppel offer, those who didn't want the Reit units would have to sell. With the Cuscaden offer, they won't have to do so," he added.

NUS Business School strategy and policy professor Lawrence Loh agreed that the offer is "good for shareholders".

"Keppel will have to go back to the drawing board now, if it really wants to keep SPH. The new offerors clearly see a lot of value in SPH's assets, which include nursing homes, student accommodation and malls," he said.

He said SPH's assets will bring "additional synergies to what is already a powerful portfolio of hotel, retail, industrial and office properties under the Cuscaden consortium".

"They would be able to unlock more value compared with Keppel," he added.

On the other hand, KGI Securities' Mr Ng said he feels the Keppel offer has "more synergy" because the conglomerate already owns part of telco M1 and assets like the Genting Lane data centre.

"There are also synergies between the SPH Reit and Keppel Reit," he added.

Professor Mak said: "There seems to be little synergy for HPL, but SPH's portfolio may be attractive to Mapletree and CLA. So for the latter two in particular, I can see why they may be interested."

The Keppel deal also includes a break fee of $34 million payable by SPH if a superior competing offer emerges that the independent directors deem more favourable to shareholders.

But Keppel also has the option, in the event of a rival offer, to make a voluntary conditional cash offer for SPH in lieu of proceeding with the acquisition by way of the scheme.

The ball is now in Keppel's court, said Rafflesia's Mr Sabnani.

"Keppel can make an all-cash general offer for SPH or take the $34 million break fee and walk away from the deal. The SPH board may also opt to go with a new Keppel offer to avoid paying the break fee," he said.

Cuscaden has said its proposed consideration will not be reduced or adjusted for the break fee, nor for SPH's dividend of three cents per share for the financial year ended Aug 31.

United First Partners' Mr Tang said that with Keppel now back in the black after registering losses last year, there is a chance it may not need SPH's assets in its portfolio.

Tiga Stars is 70 per cent owned by HPL and 30 per cent owned by Como Holdings. The latter is beneficially owned by Mr Ong, who is also the managing director and deemed controlling shareholder of HPL. The group has stakes in hotel chains such as Four Seasons, Hilton International, InterContinental Hotels Group and Marriott International. It also manages its own portfolio of hotels under brands such as Hard Rock Hotels and Concorde Hotels & Resorts.

CLA owns property group CapitaLand, real estate assets in Australia and investments in the life sciences sector, and is the majority owner of CapitaLand Investments. The Mapletree group owns and manages some $66 billion worth of real estate assets globally, such as industrial, lodging, logistics, office, residential and retail properties.

Last month, SPH shareholders agreed at an extraordinary general meeting to hive off its media business into a company limited by guarantee to be known as SPH Media Trust.