Cuscaden Peak’s offer for SPH isn’t superior by much: Analyst

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Cuscaden Peak’s bid for SPH is “probably” superior to Keppel Corp.’s, but it’s not superior by much and Keppel’s bid could overtake it if Keppel REIT’s units trade higher, Travis Lundy, an analyst/Insight Provider at Quiddity Advisors, who publishes on Smartkarma, said on Monday.

The apparent winning bid — which values SPH at S$3.9 billion — will give shareholders the choice of either S$2.40 a share, including S$1.602 in cash and 0.782 SPH REIT unit valued at S$0.798 each, or an all-cash offer of S$2.36, according to filings to SGX Monday. The valuation of the SPH REIT component of the offer is based on the REIT’s closing unit price of S$1.02 on Friday.

Last week, Keppel Corp. had sweetened its bid to acquire SPH to S$2.351 a share, in a cash-and-share offer, topping its previous bid of S$2.099 and a competing bid of S$2.10 in cash from Cuscaden Peak.

Keppel’s second offer had increased the cash component by S$0.20 a share, to S$0.868, as well as including 0.596 Keppel REIT unit and 0.782 SPH REIT unit.

Lundy noted Keppel might be a better home for SPH’s assets.

“Some people may say that the assets are better integrated into Keppel (I am certain that Keppel will say that) but it doesn’t really matter to SPH shareholders. You are being asked to give up your SPH units in return for other things,” Lundy said in a note. “The Cuscaden offer gets you more cash if you want cash, and gets you more SPH REIT if you want REITs.”

But if Keppel REIT’s units rise by 7 percent from their Friday close of S$1.15 a unit, that would push Keppel’s offer for SPH to a S$2.399 a share valuation, Lundy estimated.

Lundy said arbitrageurs which are short both SPH REIT and Keppel REIT would need to buy back Keppel REIT units, potentially causing outperformance.

But when it comes to Keppel re-entering the ring with another offer for SPH, Lundy wasn’t hopeful.

“I expect that Keppel is kind of stuck here. The only really important thing they could do is launch some kind of a deal which would push Keppel REIT up, but I don’t see it,” Lundy said. “I do not know if there is a way that Keppel could come back with a higher bid, and I expect in the end they are OK with that. There are other fish in the sea.”

Lundy advised staying long on SPH, but said he would likely sell if the price reached a 1 percent to 1.5 percent discount to the offer.

Who is Cuscaden Peak?

The consortium bidding against Keppel, called Cuscaden Peak, 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. Mapletree Investments is wholly owned by Singapore state-owned investment company Temasek.

Cuscaden Peak is 40 percent owned by Tiga Stars, 30 percent by Adenium and 30 percent by Mapletree Fortress. Tiga Stars is 70 percent owned by Hotel Properties, with the remainder held by Como Holdings, which is ultimately owned by Ong Beng Seng, who is the controlling shareholder of Singapore-listed Hotel Properties. Adenium is wholly owned by CLA Real Estate Holdings, which is an independently managed portfolio company of Temasek.