SOME shareholders of Singapore Press Holdings SPH: T39 +0.43% have seized on the company' s recent divestment of sgCarMart for S$150 million to support the belief that piecemeal disposals of assets can extract a better value than Cuscaden Peak' s all-cash offer of S$2.36 a share.

 

But this is not necessarily the reality, said SPH' s chief executive Ng Yat Chung at a virtual information session organised by the Securities Investors Association (Singapore) last Friday (Mar 11). Details of the proceedings were released on Wednesday (Mar 16).

 

Ng said that while it would be fair to say that the price tag of S$150 million is " above average" of the valuation range, Cuscaden' s all-cash consideration of S$2.36 is around two thirds of the valuation range based on the opinion of the independent financial adviser (IFA) - which set the range from S$1.93 to S$2.57.

 

" Whether or not you want to call it at the top end of the range (is up to you), but it is definitely above the mid-point and is at a good end of the range," he said.

 

Regarding the question of whether SPH would be better off disposing parts of its portfolio and returning shareholders the capital, Ng stressed that the company is selling some of the assets that are " not quite in (its) core business" .

 

" As a matter of principle, we should not be thinking about returning capital to shareholders unless we have no idea what we want to do with the capital," he said.

 

As far as sgCarMart goes, the asset got a fair offer and SPH capitalised on it to use the funds to invest further and manage debt levels. This " capital recycling" can help SPH churn its balance sheet to get better assets and return value to shareholders in the long-run, he said.

 

" Let me tell shareholders upfront, we are not in divestment mode. But even if we are in divestment mode, the divestments will take time," said Ng, citing volatile market conditions.

 

In addition, if SPH were to dispose a part of its assets that is " too big" , bondholders could trigger a default, and SPH will have to fork out money to pay off these bondholders, which ultimately leaves shareholders with less.

 

" But what we have as an alternative before us now is a good offer that is, on the valuation side, on a good end of the range for the entire portfolio. And (Cuscaden) also said that they will take care of the debt SPH has," said Ng.

 

He said SPH is " going full speed" with the Cuscaden Peak offer to get the right decision from its shareholders, and hopes to wrap the matter up as soon as possible.

 

He said he did not want to speculate on what the arbitration outcome will be, as far as the proceedings with a Keppel Corporation unit are concerned. These proceedings began when SPH decided to terminate Keppel' s implementation relating to its takeover offer.

 

" The arbitration that Keppel has decided to undertake is separate from the Cuscaden scheme. The court has allowed the Cuscaden scheme to proceed, knowing full well that the Keppel arbitration is ongoing. That is an important point for everybody to understand," said Ng.

 

To a question on whether SPH exercising its termination right for Keppel' s offer means that SPH will no longer be liable for the S$34 million break fee, Ng declined comment because this is " the subject of the arbitration" .

 

Back in November last year, a bidding war ensued between Cuscaden and Keppel for SPH' s non-media assets. Keppel' s final offer after revision stood at S$2.351 per share for SPH' s non-media assets - comprising S$0.868 in cash, 0.596 Keppel Reit unit and 0.782 SPH Reit unit per SPH share.

 

Meanwhile, Cuscaden' s revised offer gave each SPH shareholder the option of an all-cash offer of S$2.36, or S$2.40 per share comprising S$1.602 cash and 0.782 of an SPH Reit unit through a distribution-in-specie by SPH.

 

In response to a question on the length of the indicative timeline for the Cuscaden offer, Ng said the company needs to give shareholders time to make a choice between both offer types - the all-cash alternative or the combination of cash and units.

 

Should shareholders not vote in favour of the Cuscaden deal, SPH stands ready to continue managing and growing the business, and has a strategy to do it, said Ng. However, he said that he agrees with SPH' s independent directors that shareholders should vote in favour of the scheme.

 

It has been some 4 months since the revised offer from Cuscaden was tabled, noted Sias' chief executive David Gerald. He asked if there has been any improvement in the operating environment since SPH' s strategic review was announced.

 

Ng said that until Feb 24, the operating environment was seeing " gradual improvement" from the brunt of the Covid-19 pandemic.

 

Now, the company is faced with rising interest rates that will affect its cost of borrowing, the pandemic that is still affecting parts of its business at " different rates" , and also the war between Russia and Ukraine.

 

" So, the question is not whether there is (a) serious impact due to the invasion. The question is whether the impact will be serious or disastrous&hellip Even though SPH is not directly affected by the war, we have to deal with the ripple effects or second-order effects of cost inflation, the impact on consumer spending and the impact of higher costs," he said.

 

SPH' s share price has tumbled over the years, and Gerald noted that there are some shareholders who bought into the company at about S$4.50 per share in 2013 and are understandably frustrated.

 

To this, Ng said: " Even if we carry on, I will tell you this upfront - that there is no way we can get to S$4.50 within a year, given where we are today. Can I do it in two years' time? We will try our best. But I cannot give you the S$4.50 soon, given the environment we are facing."

 

SPH will not announce its H1 results before the scheme meeting, and although there is " gradual improvement" , the company is not completely out of the woods, he said.

 

SINGAPORE Press Holdings (SPH) said on Monday (Mar 7) that it is " unable to comment" on whether the company will declare a special dividend in relation to the divestment of sgCarMart to Toyota.

 

The company was responding to shareholder queries in a bourse filing ahead of a virtual Investors' Day on Tuesday relating to the proposed acquisition of SPH by consortium Cuscaden Peak.

 

Shareholders had asked if SPH will declare and pay a special dividend with the successful divestment of sgCarMart to Toyota. It was announced in February that the automotive marketplace was being sold to a Toyota consortium in an all-cash deal, valuing sgCarMart at S$150 million.

 

" At this time, we are unable to comment on whether or not the company will declare a special dividend for this divestment," SPH said.

 

The company noted that under the Cuscaden Implementation Agreement, if any dividend, right or other distribution is declared, paid or made by SPH after the scheme joint announcement date and before the effective date of the scheme, Cuscaden has the right to reduce its cash consideration by the amount of such dividend.

 

This does not include the S$0.06 dividend per share already paid in respect of FY2021, comprising the S$0.03 interim dividend paid on May 21, 2021, and the S$0.03 final dividend already paid on Nov 30, 2021 or the distribution-in-specie of SPH Reit units.

 

Cuscaden - a consortium backed by Hotel Properties (HPL), businessman Ong Beng Seng, and 2 Temasek-linked entities, CLA and Mapletree - is seeking to buy SPH with an offer of S$2.40 a share, comprising S$1.602 cash and 0.782 of an SPH Reit unit through a distribution-in-specie by SPH.

 

The consortium made the unsolicited offer for SPH in October last year, in a battle against Keppel Corporation for SPH' s assets. Last month, SPH said it has terminated Keppel Corp' s implementation agreement in relation to the latter' s takeover offer, while pressing ahead with preparations for shareholders to vote on Cuscaden' s offer.

 

SPH also said on Monday it has not received any other unsolicited offer since it received the offer from Cuscaden last year.

Court grants SPH permission to convene Cuscaden scheme meeting

 

SINGAPORE Press Holdings (SPH) said on Monday (Feb 14) that the court has made an order granting it leave to convene the Cuscaden scheme meeting.

 

In the bourse filing, SPH also said that the court has also made an order on Monday granting leave for it to withdraw the application to convene the scheme meeting in relation to the Keppel scheme.

 

Keppel Corp and Cuscaden - which is a consortium backed by Hotel Properties (HPL), businessman Ong Beng Seng, and 2 Temasek-linked entities, CLA and Mapletree - have been in a long-running battle to take SPH private by their respective schemes of arrangement.

 

SPH announced last week that it had terminated the implementation agreement with Keppel, noting that not all the scheme conditions set out in the implementation agreement previously signed by Keppel and SPH have been satisfied, even as the cut-off date of Feb 2, 2022, lapsed.

 

This prompted Keppel to file a notice of arbitration with the Singapore International Arbitration Centre (SIAC) to start arbitration proceedings against SPH.

 

Last November, Cuscaden had made a revised offer of S$2.40 a share for SPH, comprising S$1.602 cash and 0.782 of an SPH Reit (real estate investment trust) unit through a distribution-in-specie by SPH.

 

This came after Keppel tabled a final offer &ndash which was also a revision of an earlier offer &ndash of S$2.351 per share, consisting of S$0.868 per share in cash, 0.596 of a Keppel Reit unit and 0.782 of an SPH Reit unit.

 

SPH said on Monday that it will " vigorously defend its position under the Keppel arbitration in the appropriate forum and at the appropriate time" . It added that it will continue with preparations to allow shareholders to consider and vote on the Cuscaden scheme.

THE Singapore Press Holdings (SPH) takeover saga has taken a surprising turn.

 

What was at first billed as a friendly offer of SPH, sans its media business, has turned into an acrimonious affair, with SPH' s board on Wednesday (Feb 9) deciding to drop Keppel Pegasus' s scheme from being put before shareholders for approval.

 

Instead, SPH will proceed only with an offer from Cuscaden Peak - an Ong Beng Seng-led consortium. In a statement on Wednesday, SPH said it was giving notice to Keppel Pegasus to terminate the Keppel Implementation Agreement with immediate effect.

 

SPH' s rationale is straightforward: Cuscaden' s offer is superior to Keppel' s in all key aspects, including pricing, obtaining all regulatory approvals and time to completion.

 

The clincher for the termination was that not all the stipulated conditions in the Keppel Implementation Agreement have been satisfied nor has the Keppel Scheme become effective by the cut-off date on Feb 2, 2022.

 

The rationale is in line with the preliminary assessment of SPH' s independent directors, who have recommended that shareholders vote in favour of the Cuscaden scheme, and against the Keppel scheme. This came after SPH cleared an important hurdle, which involved the Securities Industry Council throwing out a clause in Keppel' s offer that restricts SPH from holding a scheme meeting for a rival offer within 8 weeks from the Keppel scheme meeting. This meant both schemes could be presented to SPH shareholders for approval at the same time.

 

However, this throws up a potential problem. What if a majority of shareholders vote yes to both schemes? Which of the two will SPH submit to the court for approval? Logic dictates that the scheme with a higher majority of votes should get the nod but logic is not necessarily law.

 

In its statement on Wednesday, SPH spelled out the dilemma: " Due to there being two parallel competing schemes, the company, together with Keppel Pegasus and Cuscaden, has been engaged in substantial discussions amongst themselves and the regulators.

 

" However, there has been no consensus in relation to which scheme would be submitted to court for approval in the event that both schemes achieve the voting majority as required by the Companies Act."

 

The statement suggests that the parties had been engaged in futile discussions. Either Keppel, Cuscaden or both do not agree to a popularity contest. Ideally, shareholders should be asked to do a two-step vote: first, whether they agree to a scheme of offer for the company.

 

If the majority' s response is no, SPH continues as it is. But if a majority vote yes, a second step would be to ask them to pick one of two offers on the table. The offer with the higher percentage votes wins.

 

However, this begs two questions: Does the Companies Act provide for such referendum-style voting If yes, will all parties agree to it?

 

Keppel has responded to the notice of termination by filing a notice of arbitration on the same day with the Singapore International Arbitration Centre (SIAC) to start arbitration proceedings against SPH and to seek various reliefs against SPH, including specific performance of SPH' s obligations. In layman terms, specific performance here means compelling SPH to put Keppel' s offer scheme before its shareholders.

 

This move suggests that Keppel believes its offer can succeed despite a lower implied offer price of S$2.318 a share compared to Cuscaden' s implied offer of S$2.361, based on the stock market close on Wednesday. It is not inconceivable that Keppel' s offer could succeed, given that the price difference between the two offers is less than 2 per cent.

 

When two offers are comparable in price, non-monetary factors may come into play in the minds of shareholders. Speaking as an SPH shareholder, I have not decided what I will do.

 

All things equal, SPH should be worth more to Keppel than to Cuscaden. Historically, SPH and Keppel have had close collaborations. For instance, they teamed up to take telco M1 private in 2019. Both companies have invested in student accommodation and commercial real estate investment businesses. If combined, they may yield better synergy. The two companies even had the same chairman for a while.

 

On the other hand, arguably only Paragon from among SPH' s assets fits the Ong Beng Seng mould. Famed for his investment in high fashion and chain of hotels and properties, notably in Orchard Road, Ong is also credited as being one of those responsible for bringing the Formula 1 night race to Singapore.

 

Given the fine margin between the two offers and the greater attraction of folding SPH into its arms, it is perplexing that Keppel was so quick to declare its second offer as final in the face of a competing bid.

 

If this was a game of chess, this move would be annotated with a question mark - which denotes a bad move or a blunder. In business and chess, the initiative lies with the player making the first move. In this takeover saga, Keppel had the first move. It was able to announce a deal with SPH on Aug 2, 2021 - nearly 3 months before Cuscaden made its move on Oct 29. Less than two weeks later on Nov 9, Keppel improved its original offer by 12 per cent, which it said was also its final offer.

 

By drawing the line so early in the game, Keppel squandered its advantage and surrendered the initiative to Cuscaden. Since it could no longer better Cuscaden' s offer, it could only mount a defence. This took the form of regurgitating over and over how its offer was a compelling one.

 

The deterrents it thought it had - a S$34 million break fee payable by SPH to Keppel in the event of an unconsummated deal and an 8-week headstart for its offer to be put before SPH shareholders over any rival offer - were not insurmountable. The coup de grace was delivered on Wednesday when SPH said it would not put up Keppel' s offer to a vote.

 

It' s not quite checkmate yet but Keppel is heading to the endgame - mediation - under unfavourable circumstances.

 

Its best case scenario - the SIAC agreeing with its position - may simply lead to the impasse noted by SPH, which it is keen to avoid.

 

If SIAC agrees with SPH - the alternative scenario - Keppel should concede rather than mount any further challenges.

 

Keppel may justifiably feel aggrieved by the turn of events after all the hard work it had put in, particularly as the prospect of its takeover of SPH might have swayed some shareholders to approve the SPH media demerger on Sep 10, 2021.

 

World champion Magnus Carlsen beat challenger Ian Nepomniachtchiin in December last year in the longest ever world championship game lasting 136 moves and nearly 8 hours. Chess lovers lapped it all up.

 

But SPH shareholders and staff won' t relish a long drawn out takeover. Staff morale may also be affected as the uncertainty could hinder SPH' s ability to fill job vacancies.

 

In corporate manoeuvres, the little people are not pawns to be sacrificed.