Keppel says waiver of walk-away rights in SPH offer 'uncommon'

SINGAPORE (THE BUSINESS TIMES) - Keppel Corporation on Tuesday (Nov 30) addressed fresh queries on the attractiveness of its final offer for Singapore Press Holdings (SPH) as the day for shareholders to vote on the offer draws closer.

In response to questions by the Securities Investors Association (Singapore), or Sias, Keppel said its decision to waive its right to walk away from the offer is an uncommon and deliberate decision to improve the attractiveness of the deal.

In dropping the material adverse effects (MAE) clause, it eliminates the risk of Keppel walking away should SPH's financial condition worsen.

The clause remains in place for Cuscaden Peak's rival bid for SPH for now, and its waiver will take effect only from the date its scheme document is dispatched.

Based on market precedents, Keppel said, it is not common for an offeror with an MAE offer condition to waive it before shareholders have decided on the offer.

Keppel further said it is able to close the transaction more expeditiously than Cuscaden and provide the shortest time to payout by mid-January next year for SPH shareholders.

The urgency to close the deal comes as uncertainty that arises from being the subject of a long-drawn takeover offer can have a "destabilising effect" on the target company.

"It distracts senior management, can affect staff morale and creates uncertainty for suppliers and customers," said Keppel.

For the offer to proceed, Keppel has to obtain approvals from the respective shareholders of Keppel Corporation and SPH, and the sanction of the Singapore High Court.

Requisite regulatory approvals have already been obtained.

Keppel is "optimistic" that its shareholders will share its view on the proposed acquisition of SPH, and support the transaction at Keppel's shareholder meeting on Dec 9.

The Cuscaden scheme is expected to be completed by February 2022, but its scheme meeting can proceed only if SPH shareholders vote against Keppel's offer at Keppel's scheme meeting.

Sias said some SPH shareholders have flagged that it would be fairer and easier for them to decide on the two offers if both offers are allowed to be considered at the same time.

In response, Keppel said it entered into an implementation agreement with SPH on Aug 2 and subsequently improved its offer to a definitive final value in discussions with SPH.

As part of those discussions, SPH and Keppel had "agreed on certain contractual obligations" regarding the due process to be taken.

As part of Keppel's deal, SPH shareholders will receive units of Keppel Reit that trades at a discount to net asset value (NAV).

Sias had questioned Keppel on the rationale behind this arrangement.

Keppel acknowledged that while the inclusion of Keppel Reit units helps the group reduce cash outlay for the offer, it also provides SPH shareholders with the "opportunity to hold the listed Keppel Reit units as an investment or monetise the holding as they deem fit, and according to their individual investment needs".

Keppel Reit is currently trading at around 5 per cent distribution yield. SPH shareholders will also receive Keppel Reit units that are trading at 10 per cent discount to NAV, said Keppel.

Assuming the transaction had been completed on Jan 15 this year, the combined accrued distributions from Keppel Reit (for the period from July 1, 2020, to Dec 31, 2020) and SPH Reit (for the period from Sept 1, 2020, to Nov 30, 2020) would have been about three cents per SPH share.

Keppel's final offer of $2.351 comprises 86.8 cents per SPH share plus 0.596 of a Keppel Reit unit and 0.782 of an SPH Reit unit.

The Cuscaden Peak offer comes in two options: $1.602 cash and 0.782 of an SPH Reit (real estate investment trust) unit per share through a distribution in-specie; or an all-cash option of $2.36 per share.