SPH media demerger vote not a surprise, but vote on Keppel's privatisation offer keenly watched

The upcoming vote for Keppel Corp's $2.2 billion takeover-cum-privatisation offer for SPH may not be so straightforward, say some market observers.
The upcoming vote for Keppel Corp's $2.2 billion takeover-cum-privatisation offer for SPH may not be so straightforward, say some market observers.PHOTOS: GIN TAY, KEPPEL

SINGAPORE - That Singapore Press Holdings (SPH) shareholders voted in favour for the demerger of the media business was not a big surprise, but the upcoming vote for Keppel Corp's $2.2 billion takeover-cum-privatisation offer may not be as straightforward, some market observers say.

SPH shareholders have voted in favour of the media restructuring plan, which will involve hiving off its entire media-related business to a company limited by guarantee (CLG) - a not-for-profit entity that will initially receive $125.8 million in financial help from SPH. This includes $80 million in cash and $30 million in SPH shares and SPH Reit units.

The Keppel deal, which values SPH at $3.4 billion, will take place through a scheme of arrangement. It was subject to SPH shareholders first approving its media restructuring plan, which they did on Friday (Sep 10).

Under the offer, SPH shareholders will receive a total consideration of $2.099 per share. This will comprise cash of 66.8 cents per share, as well as 0.596 Keppel Reit unit and 0.782 SPH Reit unit per share.

At a virtual extraordinary general meeting held on Friday, 97.55 per cent of shareholders voted in favour of the transfer of SPH's media business to the CLG for a nominal sum of $1.

"The vote shows that almost everyone agrees that this is the most optimal situation for SPH," KGI Securities investment analyst Joel Ng said.

"But the vote on Keppel's privatisation offer may not be so straightforward. That's because some investors seem to want a better offer from Keppel," he said.

Retail shareholder Mano Sabnani, who owns both Keppel and SPH shares, said he is in favour of the media demerger.

"It is necessary because the media business has changed drastically, and there's a possibility it can survive on its own. But the vote on the scheme won't be so clear cut because some shareholders may find the Keppel offer not attractive enough," he said.

"Since Keppel has said that it is a rare opportunity to buy a stable asset like SPH, and that it fits in with their business, why doesn't it offer to pay a bit more?" Mr Sabnani added.

The number of shareholders voting in favour of the scheme must exceed 50 per cent, and shareholders representing 75 per cent of SPH's share capital will need to approve the scheme and the distribution in specie of the SPH Reit units.

Mr Ng added that post-demerger, SPH will have more flexibility to explore other options including monetising its assets.

Mr Terence Wong, chief executive of fund management company Azure Capital, believes Keppel is making a fair offer.

"If Keppel had not made its offer, SPH's share price would not have reached anywhere near the current level," he said.

"This will be good for media here. Away from the scrutiny that listcos are subject to, the CLG board will have a longer runway to beef up the financials and quality of the media business," Mr Wong said.

Corporate governance advocate Mak Yuen Teen, who is a professor of accounting at the National University of Singapore Business School, said the the CLG board will have to review the media business model and strategies to ensure it is sustainable.

"Overall, it is clear that the SPH board was not able to maximise shareholder value as it felt obliged to take into account other stakeholder interests," he said.

An SPH shareholder, Prof Mak said he has not decided if he will vote for the Keppel deal.

"What were the other offers? Give us some idea at least," he said.

Prof Mak also pointed out that many SPH shareholders did not vote at Friday's meeting.

"Only about 370 million shares were voted versus 1.6 billion of total outstanding shares. So only 23 per cent of shares were voted. The virtual EGM format probably didn't help. Before the pandemic, about 58 per cent of shares were voted at shareholder meetings on average," he added.