SPH - UOB Kay Hian 2021-11-16: Cascaden Returns With A Superior Offer


SPH - Cascaden Returns With A Superior Offer

  • Cuscaden announced that it had submitted an improved offer with a full cash offer of S$2.36/share or cash-plus-share offer of S$2.40/share for all of SPH’s shares, at a consideration of around S$3.9b. Both options are superior to Keppel’s original cash-plus-share offer of S$2.35/share.
  • Barring any new offer, we recommend shareholders to ACCEPT the highest offer, which is currently Cuscaden’s offer which provides higher consideration and price stability.

Cuscaden Peak returns with a superior offer for SPH

  • Cuscaden Peak (Cuscaden) has announced a revised offer, via a scheme of arrangement, which now gives Singapore Press Holdings (SPH, SGX:T39)’s shareholders an option to choose between a S$2.36/share full cash offer or a cash-plus-stock offer of S$1.602 cash/share and 0.782 SPH REIT (SGX:SK6U)/share for a total consideration of S$2.40/share. This is superior to Keppel Corp (SGX:BN4)’srevised cash-plus-stock offer of S$2.351/share as both options give SPH shareholders higher total/cash consideration and price stability.
  • SPH has acknowledged that Cuscaden’s offer is superior to Keppel’s offer and both parties have entered into an Implementation Agreement. Subject to an Independent Financial Advisor’s (IFA) opinion and the absence of a superior competing offer, SPH’s preliminarily recommended shareholders to vote against Keppel’s scheme and vote in favour of Cuscaden’s scheme.

Pending approvals.

  • Similar to Keppel’s scheme, Cuscaden’s scheme requires similar approvals and has submitted applications to all the relevant regulators. Management has applied to MAS, IMDA and the Australian Foreign Investment Review Board for the necessary regulatory approvals. A Composite Document, including the recommendation of the Independent Directors along with the advice of the IFA on the Cuscaden scheme, will be despatched in due course.

Keppel’s scheme meeting key to determine outcome.

  • Keppel’s scheme meeting would still carry on no later than 8 Dec 21 whereby SPH shareholders would have to vote on approving Keppel’s scheme. If SPH shareholders vote in favour of Keppel’s scheme, Keppel’s scheme would go into effect and Cuscaden’s scheme meeting would not be convened following this decision. However, if SPH shareholders were to vote against Keppel’s scheme, Cuscaden’s scheme meeting (which can only be held eight weeks after Keppel’s) would then be held, giving SPH shareholders the chance to vote for Cuscaden’s scheme. We also highlight that Keppel has received all domestic and international regulatory approvals whereas Cuscaden has not – in our view this introduces some element of uncertainty to its offer.
  • Once Keppel’s scheme has been voted down, SPH shareholders would have to vote in Cuscaden’s scheme meeting to vote for the scheme. Cuscaden’s scheme meeting is expected to be held sometime in early-Jan 22. Similar to Keppel’s scheme meeting, SPH shareholders will have to vote to approve Cuscaden’s scheme and SPH REIT’s dividend-in-specie (DIS). If rejected, SPH would remain listed. If approved, SPH shareholders would now elect between the full cash offer of S$2.360/share or cash-plus-stock offer of S$2.400/share. The default election is cash-plus-stock consideration. Management has mentioned that should any competing offer arise ahead of Cucaden’s scheme meeting, the company would still consider any competing offer if it maximises shareholder value.
  • Once Cuscaden’s scheme is approved, SPH REIT is next. Depending on the final proportion of SPH shareholders choosing between the two options, Cuscaden might make a mandatory general offer for all the units of SPH REIT at a minimum price of S$0.964/share, only if Cuscaden and its related parties hold more than 30% of SPH REIT units after the DIS. This implies that if less than 80% of SPH’s shareholders choose the cash-plus-stock option, which is very likely in our view given the preference for a full-cash offer, Cuscaden would be obligated to make a mandatory general offer for SPH REIT at S$0.964/share.
  • Cuscaden is not obligated to offer anything higher.

No surprise given high quality retail and commercial assets.

  • Tenant sales from our SOTP-based target price of S$2.10/share rises to S$2.28/share, 4%/5% below Cuscaden’s revised offer of S$2.36/share or S$2.400/share.

ACCEPT Cuscaden’s offer.

Llelleythan Tan Yi Rong UOB Kay Hian Research | John Cheong UOB Kay Hian | https://research.uobkayhian.com/ 2021-11-16