Competition hots up for SPH assets: Higher Keppel bid in the works?

SINGAPORE - Just as Singapore Press Holding (SPH) was readying to put out the $3.4 billion cash-plus-shares offer from Keppel Corporation to its shareholders at its upcoming EGM, onto the scene comes businessman Ong Beng Seng together with two Temasek-linked entities, with an all-cash offer of $2.10 for the property group.

In a surprise early morning announcement, Cuscaden Peak - a consortium comprising a unit of Mr Ong's Hotel Properties, a unit of Mapletree group and the majority shareholder of Capitaland - announced it had submitted an all-cash offer for SPH via a scheme of arrangement.

The $2.10 cash offer is slightly above what is already on the table from Keppel Corp, also a Temasek-linked entity.

Almost three months ago, Keppel Corp made an offer to buy out SPH's non-media business.

It is offering SPH shareholders cash of 66.8 cent, plus 0.596 Keppel Reit (real estate investment trust) units and 0.782 SPH Reit units for every SPH share they own. Based on last Friday's closing prices, the value of Keppel Reits on offer is 71.5 cent and SPH Reits is 71.6 cents.

So, the total value of all this when the offer was made was $2.099 per share.

In short, for every 1,000 SPH shares owned, the shareholder gets $668 in cash, $715 worth of Keppel Reits and $716 worth of SPH Reits.

The offer is a 5 per cent premium to SPH's 52-week high, 112 per cent to its 52-week low late last year, and a 29.5 per cent premium to the volume-weighted average share price over the last six months.

Of course, the value of Keppel's offer can fluctuate in tandem with the price of the two Reits. At current levels, Keppel's offer is $2.09797 per SPH shares, a whisker below the new $2.10 offer.

Now, the board of SPH is faced with acting on this competing bid.

All this is rather unusual - and even exciting - in the Singapore context, especially considering that three Temasek-linked units are in the mix.

But there are some salient features which the SPH board and shareholders will have to consider.

The Cuscaden Peak offer, being all cash, takes out the market volatility from the offer.

Keppel's cash-plus-Reits offer is based on prices on July 30, 2021. However, the prices of the Reits have fallen somewhat since the announcement. Will Keppel raise its offer price?

The Keppel deal will bring in an additional 60,000 shareholders into the two Reits. Could this put downward pressure on the units? Then, there is also the transaction or brokerage cost for selling the Reits later.

Secondly, both the Keppel and Cuscaden offers are not adjusted for dividends, meaning SPH shareholders can collect their 3 cents dividends, whichever deal they agree to.

But the Cuscaden offer is a simple and straightforward proposal. There is no need for shareholder approval on the offerer's side. Only SPH shareholders need to approve the offer.

For the Keppel offer, both Keppel and SPH shareholders have to separately approve the offers at special EGMs.

Also, the Keppel deal includes a break fee of $34 million payable by SPH if a superior competing offer emerges which the independent directors deem more favourable for shareholders.

Whatever the case, this show is not over by any means.

In a statement early on Friday, Keppel said "the proposed SPH ex-media transaction is progressing well and we have obtained requisite approvals from the Monetary Authority of Singapore and Australia's Foreign Investment Review Board for the proposed transaction".

The Australian approvals are needed as SPH also has properties in Australia.

Keppel might just come back with an improved offer.

Afterall, whoever clinches SPH will gain access to SPH's real estate footprint, which includes malls, residential properties, and a portfolio of purpose-built student accommodation and nursing homes.

As Keppel itself said when it made its offer, SPH provides a quality portfolio of businesses and assets which are aligned with and complement three out of Keppel's four focus areas, and hence represents a "unique opportunity" for the company.

Obviously, Mr Ong and his partners agree.