Date: November 11, 2021
SPH shareholders, must surely be pleased with the current Offers for SPH shares. Keppel’s significantly improved and attractive final offer this week is a game changer, although the Cuscaden cash Offer will remain attractive to those who cannot wait for long term gains and only want all in cash.
The final consideration of S$2.351 per SPH share, which includes additional $0.20 in cash, is 12% higher than Keppel’s initial offer, and 57% higher than SPH’s unaffected price on 30 March.
But what is at stake for investors, they must know is not just a question of price.
An important point SPH shareholders may consider favourably is the deal certainty that Keppel offers at the moment, in the absence of any other superior Offer. Keppel’s revised offer is irrevocable and it has waived the material adverse effect clause, eliminating the risk of the offeror walking away should SPH’s financial condition take a turn for the worse. Importantly, Keppel has also secured the requisite approvals from the Monetary Authority of Singapore and Australia’s Foreign Investment Review Board. Keppel also does not need IMDA’s approval for SPH’s M1 stake. In contrast, any competing offeror would need to seek these approvals, which could take some time.
Another pleasing aspect of Keppel’s offer to SPH investors, surely, is that it also provides a quick payout for SPH shareholders, who could receive their cash and REIT units in about two months, by mid-January 2022. SPH shareholders, many of whom are retail investors, can start to enjoy regular distributions and potential upside from the REITs, assuming the economy recovers from the pandemic and the progressive lifting of travel restrictions.
Some have argued that full cash is preferable to a part-script-part-cash offer. But it must be recognised that there are also benefits in Keppel’s transparent bid structure, which effectively gives SPH shareholders a large 45% tradable stake in SPH REIT, and passes on any future upside benefits to SPH shareholders.
SPH has announced that it is required to hold its EGM and scheme meeting for shareholders to decide on Keppel’s scheme by 8 December 2021, even if Cuscaden or any other party provides a revised and superior proposal. Keppel’s scheme would be put to a vote first by SPH’s shareholders, who would have to decide if they prefer an attractive bird in hand, or for an outcome some time later.
In the meantime, SPH shareholders must recognise that continued uncertainty and delay could weigh on staff morale and potentially affect the performance and value of SPH if this episode is allowed to drag on. It may thus not be in SPH shareholders’ interest to drag this out for too long.
On Keppel’s side, it also has to assure its own shareholders that it is not overpaying for SPH and would not be drawn into any protracted price war. Keppel has rightly, therefore, stated clearly that this is a final offer. It would probably convince its investors that the higher consideration would only have limited impact on its gearing, and assure them that it would come down over time as it continues its asset monetisation.
Another matter of concern to shareholders would be whether Keppel’s vision 2030 growth plans would be affected, and its ability to reward shareholders with dividends. Keppel would have to give them the assurance.
To help the SPH shareholders understand the offers better, SIAS will hold dialogue sessions with SPH CEO and separately with Keppel CEO at the appropriate time to help shareholders of both Companies to have a better understanding of the Offers and clear their doubts to make an informed decision. Will there be another Offer better than Keppel’s? Only time will tell.
David Gerald
Founder, President & CEO
SIAS
