SMRT CORPORATION LTD
S53.SI
SMRT Corporation - BUYOUT BY TEMASEK – TAKE IT
- Privatisation by way of scheme arrangement.
- Scheme price of S$1.68/share in cash.
- Accept the offer.
Temasek to pay ~S$1.2b for remaining stake in SMRT
- Temasek Holdings (Temasek) last evening announced the proposed acquisition of all issued ordinary shares (other than those already held by Temasek) of SMRT Corporation (SMRT) for S$1.68/share in cash, by way of a scheme of arrangement. This announcement came after SMRT and LTA reached an agreement last Friday on the transition to the New Rail Financing Framework (NRFF), which we did not think was a good deal for SMRT (18 July report) with earnings upside capped.
- Temasek has also clearly stated that their intention is to privatise and delist SMRT.
Temasek not eligible to vote at scheme meeting
- The scheme arrangement for this proposed acquisition is still subject to several conditions to be satisfied in order to be effective. However, we would like to highlight that one of the conditions is to get SMRT‘s shareholder approval (excluding Temasek) through a scheme meeting to be convened pursuant to an order of the High Court.
- The scheme will require:
- the approval by a majority in number of shareholders present and voting (in person or proxy) at the scheme meeting and such majority must hold not less than three-fourths in value of the shares (excluding Temasek’s shares) voted at the scheme meeting,
- sanction of the scheme by the High Court.
Makes sense to sell in market at ~ S$1.68
- The scheme price of S$1.68 represents a 15.9%, 19.1% and 8.7% premium over our 12-month FV estimate of S$1.45, consensus target price of S$1.41 and the last transacted price on last Friday before the trading halt, respectively.
- Furthermore, on unexciting outlook and capped earnings upside of SMRT post-NRFF, we recommend investors to ACCEPT THE OFFER by approving the scheme arrangement.
- With Temasek’s buyout on the table, we expect SMRT’s share price to spike up when the stock resumes trading today. However, as there is the risk of the proposed acquisition falling through, we advise investors to also consider selling part of their holdings in the open market at around S$1.68.
Eugene Chua
OCBC Securities
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http://www.ocbcresearch.com/
2016-07-21
OCBC Securities
Analyst Report
1.45
Same
1.45
