Both bidders for SPH have room to increase offers: Analyst

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Consortium Cuscaden Peak’s counter-offer to Keppel Corp.’s bid for Singapore Press Holdings (SPH) “is designed to start a conversation, not finish it,” with both offers on the table appearing set to rise, Travis Lundy, an analyst/Insight Provider of Quiddity Advisors, who publishes on Smartkarma said in a note Friday.

“I think Keppel has room to bid up a bit more, and therefore I expect the Cuscaden team does too,” he said in the note.

He pointed toward the slim daylight between the two bids.

The new bid for SPH is for S$2.10 a share in cash, the consortium said in a filing to SGX Friday.

That compares with Keppel’s bid of S$0.668 in cash and 0.596 Keppel share. As part of Keppel’s offer, SPH would also distribute 45 percent of SPH REIT to shareholders, or 0.782 SPH REIT for every SPH share held. In August, when the Keppel bid was made, that translated to an implied value of S$2.099 for every SPH share. Keppel’s bid was valued at S$2.2 billion.

SPH’s shares, which are due to re-start trade on Monday, last changed hands at S$1.99.

The consortium bidding against Keppel includes Tiga Stars, a wholly owned subsidiary of tycoon Ong Beng Seng’s Hotel Properties, and Adenium, which is a wholly owned subsidiary of Temasek portfolio company CLA Real Estate Holdings, as well as Mapletree Investments‘ indirect wholly owned subsidiary Mapletree Fortress, the consortium said. Mapletree Investments is a wholly owned by Temasek.

Temasek also owns 20.99 percent of Keppel as of 9 July, making it the largest single shareholder, according to SGX data.

Lundy said how SPH’s shares perform Monday is worth watching, as a move higher would indicate the market is expecting offer prices to rise.

“This is a serious bidder. Ong Beng Seng saw lobang and brought in the others. Now one set of Temasek-backed companies just sabo’d another,” Lundy said in a note titled “SPH Lobang – Holders So Shiok, Bidders So Kiasu.” In Singlish, lobang means opportunity and sabo means sabotage, while shiok means enjoyable and kiasu means fear of losing out, or must win.

Lundy said the consortium’s next bump higher would likely need to be around S$2.20 a share, while if Keppel wanted to end the battle early, it would likely mean adding another S$0.05 to S$0.10 in cash to its offer. The analyst advised staying long on SPH’s shares.

The analyst also pointed to the qualitative differences between the two bids.

“The Cuscaden deal is just cash. Cuscaden takes it all. This is an industrial bid rather than an opportunistic one. Though it is probably opportunistic,” the analyst said.

“The Keppel deal was that they would be buying the RemainCo business (a combination of assets which could later be injected into REITs, and a bit of development), and foisting existing REIT securities off on holders. It was a way to grab assets which could see value uplift without putting out much cash – it would raise the ROE [return on equity] for the buyer,” he said.

If Cuscaden Peak’s bid is successful, it would come with an obligation to offer for all of SPH REIT’s units.

Lundy said the offer for SPH REIT’s units would be at S$0.957, based on the requirements for mandatory offers. SPH REIT’s units last changed hands at S$0.975.

In addition to its newspaper, magazine and other media assets, which will be hived off into a non-profit, SPH holds around 65 percent of SPH REIT and 70 percent of the Seletar Mall. It also holds 50 percent of an integrated development called The Woodleigh Residences and The Woodleigh Mall, and it has a portfolio of purpose-built student housing in the U.K. and Germany. SPH also operates in the aged-care sector in Singapore and Japan.

SPH’s student accommodation assets may be particularly attractive to Mapletree Investments.

Mapletree Investments sponsors the Mapletree Global Student Accommodation Private Trust. Mapletree has been exploring an initial public offering (IPO) for its student accommodation assets for several years.

Chua Tiow Chye, Mapletree’s deputy group chief executive officer, told the Business Times in August that Mapletree was evaluating potential monetisation options for its student accommodation portfolio, which could include a public REIT or a private fund.

SPH also holds an interest in telco M1, together with Keppel, and SPH and Keppel Data Centres have tied up to develop a data center in Singapore.