The outcome of Temasek's proposed privatisation of SMRT now hinges on the firm's 49,000 shareholders, many of whom are retail investors. Temasek's bid needs a majority of shareholders present at a meeting to vote for it.
These shareholders will have to hold at least 75 per cent of the value of SMRT shares held by all investors at the meeting, which will be called by October.
Temasek, which already holds 54 per cent of SMRT, will not be able to vote at this meeting. Neither can it raise its price and if the offer fails, SMRT will remain listed and Temasek will have to wait a year to try again. Most takeover bids are made through a general offer, which does not guarantee a 100 per cent stake even if the buyer gains majority control. But this buyout structure is called a scheme of arrangement and means the potential buyer will get all of the company or see its bid fall through.
SMRT chief executive Desmond Kuek said the deal is structured this way because Temasek is already a majority shareholder in SMRT and is not looking to raise its stake. "Its intention is not to increase its holding but to delist SMRT," he added.
Temasek International president Chia Song Hwee said: "We believe that the offer price is a fair price which will allow us to achieve our objective of taking the company private."
Analysts sharply reduced SMRT's target share price after the final terms of its asset sale to the Land Transport Authority were released last Friday. The deal fell short of market expectations.
Macquarie analyst Justin Chiam said in a note last week that the new rail framework will be less profitable for SMRT.
"We believe the business is now worth $1 per share and see an offer above the target price as a good exit opportunity in the face of eroding fundamentals," he added.
Veteran investor Mano Sabnani, who holds 20,000 SMRT shares, said some would find Temasek's offer price of $1.68 too low. The new rail framework offers good prospects for SMRT as an asset-lite company and could mean stronger earnings in future, he noted.
"Many shareholders have invested in the company for a long time and depend on dividend income... $1.80 to $1.90 would have been more palatable," he said.