UPDATE: Keppel-SPH vehicle to make offer for M1 at S$2.06 a share

M1 retail outlet at Orchard Road In SingaporeM1 retail outlet at Orchard Road In Singapore. Image taken pre-Covid

Keppel Corp. and Singapore Press Holdings (SPH), via a special purpose vehicle called Konnectivity, plan to make an offer for all of M1 at S$2.06 a share, it said in a filing to SGX on Thursday.

The offer price is a premium of 26 percent to the last traded price of S$1.63 on Friday of last week.

“To deal with the fast-changing landscape and increasing competition in the Singapore telecommunication sector, M1 will need to undertake extensive business transformation requiring long-term shareholder and management commitment,” Keppel said in a press release.

“The business transformation is expected to be a complex multi-year journey. The offer provides an opportunity for M1 shareholders who are not prepared to bear the risks,” Keppel said.

“With majority control, Keppel Corp. and SPH, who are long-term shareholders of M1, would be better able to support M1’s management to implement strategic and operational changes to strengthen its performance and position as a connectivity platform,” it added.

In the SGX filing, it pointed to competition and disruption from the impending launch of TPG Telecom, which is a fourth Mobile Network Operator (MNO), and the launch of new Mobile Virutal Network Operators in the city-state.

“Continuing the status quo risks stagnation and further decline in shareholder value,” it said.

It also noted that M1’s dividends could have been affected by the intensifying competition and the allocation of resources to the expected several-years-long transformation plan. That plan includes “digital transformation” of its operating platform, cost management moves, seeking ways to “unlock” value form underlying infrastructure and growth initiatives in new markets.

The Konnectivity stakes

Konnectivity has a deemed interest of 33.27 percent of M1, it noted, with Keppel Telecommunications & Transportation, which is 79 percent owned by Keppel, owning 19.2 percent, while SPH has a 13.45 percent stake held via wholly owned subsidiary SPH Multimedia.

Keppel Konnect, a wholly owned subsidiary of Keppel, will hold 80 percent of Konnectivity, while SPH will hold the remaining 20 percent, it said.

SPH said it would roll its M1 stake into Konnectivity and invest up to around S$51.3 million in cash to partially fund the offer, with its effective stake in M1 potentially set to rise to 16.13 percent after the close of the offer.

“The transaction is earnings accretive for SPH shareholders,” Ng Yat Chung, CEO of SPH, said in a press release. “We are supporting KCL in this offer as we see the potential for long term value creation in M1.”

Ng said SPH also saw opportunities to leverage on M1’s mobile platform to offer on-demand and ready digital content.

Keppel T&T will remain a shareholder of M1, with Keppel’s privatization offer for Keppel T&T, also announced on Thursday, offering Keppel T&T’s shareholders the chance to exit at a premium as well, Keppel said. The privatization offer is independent of the M1 offer, Keppel said.

The SGX filing said the intention was to gain majority control of M1 and if the free float requirement of 10 percent for the stock isn’t met, it would delist the stock and compulsorily acquire the remaining shares.

The offer is conditional on the Info-communications Media Development Authority granting approval, it said, adding once that was received, the offer will be formally made and would become conditional on obtaining more than 50 percent of M1’s issued capital, it added.

Assuming that IMDA approval is received within eight weeks, the earliest possible close of the offer is in 15 weeks, it said.

Shares of Keppel and SPH were halted on Thursday before the market open; shares of M1 and Keppel T&T were halted on Monday.

Credit Suisse advised SPH on the offer, SPH said.

This article was originally published on Thursday 27 September 2018 at 9:15 A.M. SGT; it has since been updated. 

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