Keppel DC Reit, M1 to create special purpose vehicle to house M1 network assets

Keppel DC Reit and telco M1 signed a non-binding term sheet to establish a special purpose vehicle on April 28, 2021.
Keppel DC Reit and telco M1 signed a non-binding term sheet to establish a special purpose vehicle on April 28, 2021.PHOTOS: KEPPEL CORP, M1

SINGAPORE (THE BUSINESS TIMES) - Keppel DC Reit and telco M1 have signed a non-binding term sheet to establish a special purpose vehicle (SPV) to own and operate M1's network assets, the companies said in a joint media release on Wednesday.

M1 will be responsible to establish the SPV, which will acquire M1's current mobile, fixed and fibre assets for S$580 million in cash.

The consideration will be funded through external financing of S$493 million and an S$87 million investment by Keppel DC Reit, in return for a combination of debt securities and preference shares to be issued by the SPV. While M1 will retain 100 per cent of the SPV's ordinary shares, M1 and Keppel DC Reit will be equally represented on the board of the SPV.

The SPV will enter a 15-year network service agreement with M1, in which the SPV will contract its network capacity to the telco while M1 handles the operations and maintenance of the network assets.

The proposed transaction is subject to satisfactory due diligence, negotiation and execution of definitive agreements, relevant regulatory approvals and if required, shareholders' or unitholders' approval, among other conditions.

M1 is jointly-owned by Keppel Corporation and The Business Times' publisher Singapore Press Holdings.

M1 chief executive Manjot Singh Mann said the proposed transaction is part of the Keppel Group's asset-light business model, and will free up capital for investment in new capabilities and other growth initiatives.

Anthea Lee, chief executive of Keppel DC Reit Management, noted that the planned investment is in line with the Reit's drive to support the global digital economy. "It also allows us to gain a foothold in Singapore's connectivity landscape, which we can leverage when seeking further opportunities for real estate and assets that support the digital economy," she said.

In a separate announcement on Wednesday, Keppel DC Reit said it is expanding its investment mandate to include real estate and assets necessary to support the digital economy. This is expected to strengthen the Reit's portfolio for long-term growth while maintaining its focus on real estate assets used primarily for data centre purposes.

Keppel DC Reit units closed flat at S$2.73 on Wednesday.