Temasek Holdings' $1.68-a-share offer to take SMRT Corp private is "fair and reasonable", according to the independent financial adviser Rothschild yesterday.
It has recommended that shareholders either vote in favour of the scheme at a meeting on Sept 29 or sell their shares in the open market if they are able to obtain a higher price.
SMRT's independent directors agreed with the findings and "unanimously" recommended that shareholders vote in favour of the buyout.
Temasek wants to buy the 46 per cent of the public transport company that it does not already own via a scheme of arrangement. The Singapore investment company, which holds 54 per cent of SMRT, will abstain from voting on Sept 29. As of Aug 30, SMRT has about 49,789 minority shareholders holding a total of around 702.1 million shares.
In July, Temasek announced its $1.18 billion buyout offer, which will be done through its wholly- owned subsidiary Belford Investments.
Privatisation is expected to give SMRT, which has suffered multiple breakdowns in recent years, greater flexibility in delivering rail services, without the short-term pressures of being a listed company. It will also remove all costs and distractions associated with listing requirements, including quarterly reporting.
If the buyout succeeds, SMRT will be delisted from the Singapore Exchange, 16 years after it went public.
Shareholders can expect to receive payment within seven business days from when the scheme becomes effective. If it does not succeed, Belford will not acquire any shares and SMRT stock will continue trading.
Belford said the $1.68 offer price is above SMRT's highest traded price between July last year and July this year. Those who invested in SMRT during its initial public offering in July 2000 will realise an 11 per cent annualised return on their investment, if the scheme is successful.
Temasek is pursuing the privatisation deal through a scheme of arrangement rather than a general offer. This means that more than 50 per cent of shareholders present in person or by proxy at the meeting - and who hold at least 75 per cent of the shares represented - must vote in favour of it.
So if 1,000 shareholders holding one million shares are present, at least 501 holding 750,000 shares must vote in favour of the buyout.
In comparison, a general offer succeeds only if the buyout firm secures 90 per cent of the outstanding minority shareholder votes, a significantly higher threshold.
SMRT's independent directors said in a statement yesterday: "In the event the scheme becomes effective, it will be binding on all scheme shareholders, whether or not they were present in person or by proxy or voted at the scheme meeting."
Proxy forms must be lodged by Sept 27. The scheme meeting will be held at 3.30pm on Sept 29 at The Star Theatre at The Star Performing Arts Centre.
It will be held directly after an extraordinary general meeting on the new rail financing framework, which involves the Land Transport Authority assuming ownership of all operating and fixed assets as well as paying for replacements. This meeting will begin at 2.30pm.
SMRT shares were flat at $1.655 yesterday.
Correction note: In an earlier version of the story, we reported in the third last paragraph that the scheme meeting will be held on Sept 27. It should be Sept 29. We are sorry for the error.