The independent financial adviser for Keppel Telecommunications & Transportation (T&T) says a buyout offer by parent company Keppel Corp is "fair and reasonable".
Rothschild & Co has recommended that Keppel T&T shareholders back the proposed scheme at a meeting on April 2 or sell their shares in the open market if they can beat the offer price. Keppel T&T's independent directors have accepted the recommendation.
Keppel Corp, which owns 79.09 per cent of Keppel T&T shares, is offering $1.91 in cash for each of the remaining shares. Keppel T&T shares closed at $1.88 last Friday.
If Keppel T&T investors reject the scheme, their stock will continue to trade on the Singapore Exchange.
Rothschild's recommendation was based on the "low trading liquidity" of Keppel T&T's shares over the 12 months to Sept 27 last year, when the buyout scheme was announced.
"The scheme represents a clean cash exit opportunity for shareholders to realise their entire investment without incurring brokerage and other trading costs," Rothschild added.
The average daily trading volume of Keppel T&T's shares was 300,000 in the 12 months to March 1, with an uptick after the buyout announcement in September.
Keppel Corp has said privatising Keppel T&T will give it more flexibility to allocate resources without the reporting requirements and compliance costs associated with its listed status. Keppel Corp is also looking to streamline its own corporate structure.
Moreover, the move will allow Keppel Corp to grant Keppel T&T full access to its network and resources as it grows its data centre and urban logistics businesses.
Keppel T&T owns 19.3 per cent of telco M1. Shareholders concerned about M1's prospects will get a "clean cash exit" from Keppel T&T if the scheme takes effect, Keppel Corp said.
Investors who want to realise their investment in cash may do so at a "premium to prevailing market prices" prior to the joint announcement date without incurring brokerage fees.
Keppel Corp said it will work with Keppel T&T's management to execute transformation strategies that could enable the firm to better utilise its resources.
Until a decision is made on this transformation, Keppel Corp said, it does not intend to introduce major changes to Keppel T&T unless circumstances demand it.