Keppel Corp and Singapore Press Holdings (SPH) will make a pre-conditional voluntary general offer of $2.06 per share for all M1 shares they do not own.
The offer values Singapore's third-largest mobile operator at around $1.91 billion.
Joint venture company Konnectivity, which is majority-owned by Keppel, will lodge the offer, the companies announced yesterday.
SPH already owns 13.45 per cent of the telco. It will inject all of its 124.45 million M1 shares into Konnectivity. It is envisaged that the media and property group will invest up to $51.3 million in cash to partially fund the offer.
Depending on the level of acceptance, SPH's eventual shareholding in Konnectivity will range from a minimum of 20 per cent to a maximum of 43.84 per cent. Its effective interest in M1 could go up to 16.13 per cent.
SPH chief executive Ng Yat Chung said yesterday: "We are supporting Keppel in this offer as we see the potential for long-term value creation in M1 from the growth and business transformation initiatives to be undertaken (after) the offer (closes)."
He added that the transaction will add to earnings per share for SPH shareholders.
Keppel Corp has increasingly been transforming its traditional B2B (business to business) business to include retail customers in gas, electricity and urban logistics. Incorporating M1's capabilities and two million customers in a combined digital platform would provide opportunities for synergies and cross-selling of services.
KEPPEL CORP CEO LOH CHIN HUA
We are supporting Keppel in this offer as we see the potential for long-term value creation in M1 from the growth and business transformation initiatives to be undertaken (after) the offer (closes).
SPH CHIEF EXECUTIVE NG YAT CHUNG
Entry and growth of M1
1994: A consortium - comprising Keppel Group, Singapore Press Holdings (SPH), Cable & Wireless and Hong Kong Telecom - forms M1 to enter the mobile telecommunications market in Singapore.
May 1995: It gets the licence to operate Singapore's second cellular telephone and radio paging services.
April 1997: Commercial launch of mobile services.
1998: M1 reaps net earnings of about $7.9 million, its very first set of profit figures since it began operations in April 1997.
December 2002: Listed on the Singapore Exchange.
2005: Axiata, then called Telekom Malaysia, becomes a major shareholder, while Cable & Wireless and Hong Kong Telecom exit the company.
December 2006: Launches M1 Broadband.
September 2010: Launches fibre broadband ser-vices on the Next Generation Nationwide Broadband Network.
June 2011: Launches the Long Term Evolution (LTE) network.
September 2012: Offers nationwide 4G service.
Sept 27, 2018: SPH and Keppel Corp announce they will be making an offer for the remaining M1 shares they do not own.
Mr Ng noted that Keppel has demonstrated strong commitment to lead M1 in its transformation plans, adding: "We also see opportunities for SPH to leverage M1's mobile platform to offer on-demand and ready digital content to better serve our customers."
Approval from the Infocomm Media Development Authority is needed before the offer can be made. Once that is obtained, the offer will be formally made, and it will become unconditional when Konnectivity and its concert parties obtain more than 50 per cent of M1's issued share capital by the close of the offer.
Meanwhile, Keppel Corp, which owns 19.33 per cent of M1 through a 79.22 per cent stake in Keppel Telecommunications & Transportation (Keppel T&T), said it would be making a general offer for Keppel T&T at $1.91 per share in cash, valuing the company at $1.07 billion. It plans to delist the company.
"The proposed scheme is consistent with Keppel Corporation's strategy to simplify (its) corporate structure, with a view to improving capital allocation and better aligning Keppel T&T's interests with the rest of the Keppel group's," it said.
At $1.91 a share, the offer is 40 per cent over Keppel T&T's last traded price, and one-month volume-weighted average price of $1.365.
Keppel Corp CEO Loh Chin Hua said: "The scheme will similarly allow Keppel T&T's minority shareholders, who may be concerned about the prospects of M1 in the face of heightened competition, to make a clean cash exit from Keppel T&T at a substantial premium."
Mr Loh added that the offer for M1 is in line with Keppel's mission as a solutions provider for sustainable urbanisation.
He said: "Keppel Corp has increasingly been transforming its traditional B2B (business to business) business to include retail customers in gas, electricity and urban logistics.
"Incorporating M1's capabilities and two million customers in a combined digital platform would provide opportunities for synergies and cross-selling of services."
Mr Loh also noted that Keppel and SPH have been long-term shareholders of M1 - since the 1990s.
"Notwithstanding the challenges currently facing the industry, we see considerable potential in M1 and have developed a transformation plan to sharpen M1's competitiveness. Through majority control, we would, together with SPH, be better able to support M1's management to drive changes and create greater value in the company."
Fitch Solutions analyst Kenny Liew said in an e-mail that M1 will become more competitive and benefit from a clearer strategy, adding that the deal will offer Keppel synergies in its goal of becoming an integrated communications player.
However, Mr Loh said the transformation of M1 was a complex undertaking that would take several years. Hence, the offer allows M1 shareholders who are not prepared to wait to cash out.
It is not known if Malaysian carrier Axiata Group, which is M1's biggest single shareholder with a 28.7 per cent stake, will accept the offer. Yesterday, Axiata said that the offer should reflect the accurate future value of M1 (inclusive of an acceptable control premium), consistent with market standards.
"We will continue reviewing all options available to us in relation to our shares in M1, with the sole objective of vigorously protecting and enhancing shareholders' value of both Axiata and M1, the latter via our board representation," Axiata said.
Macquarie Capital Securities (Malaysia) said the M1 offer is attractive in the light of the challenges posed by the entry here of a fourth operator, TPG Telecom.
UOB Kay Hian said the deal is a "slight positive" for SPH as it benefits from M1 potentially performing better at low or no cost to it.