The bidding war on SPH explained

TL;DR

• Keppel has raised its offer for SPH to S$2.351 per share, above its original offer of S$2.099, as well as the Cuscaden Peak consortium’s offer at S$2.10 per share.
• Keppel sees SPH’s assets as a “very attractive and strategic portfolio”, as it allows Keppel Capital’s AUM to grow 27% to S$47bn with the acquisition.
• The Cuscaden Peak offer could be more opportunistic as its remains unclear what Hotel Properties could do with the crown jewel of Paragon Mall.
• Keppel’s offer appears to be the best on the table for now, and is almost more certain with regulatory approvals received.

What happened?

• Keppel has raised its privatization offer for Singapore Press Holdings (SPH) to S$2.351 per share. The offer comprises cash of S$0.868 per share, as well as units of Keppel Reit and SPH Reit. This is higher than its original offer of S$2.099 per share made in August.
• The counter-offer was in response to a competing offer of S$2.10 per share in cash made by a consortium named Cuscaden Peak. The consortium comprises of Hotel Properties (HPL) and its managing director Ong Beng Seng, as well as two Temasek-linked entities – CLA Real Estate and Mapletree Investments.
• Following the restructuring of its media business, SPH now own largely property assets comprising of retail malls in SPH REIT, as well as purpose-built student accommodation (PBSA) and aged-care assets.

What does this mean?

• Keppel sees strategic fit from SPH assets. Keppel is interested in SPH’s assets as it believes it is uniquely positioned to enhance and unlock value in the portfolio. In particular, Keppel Capital’s Asset Under Management (AUM) could grow 27% from S$37bn to S$47bn following the acquisition. It will be able to gain access to more retail assets such as Paragon and Clementi Mall, to add to its current portfolio of I12 Katong. In addition, it will allow Keppel to enter the PBSA which is perceived to have attractive growth prospects in the long term.
• Cuscaden could be more opportunistic. On the other hand, Cuscaden’s proposed acquisition of SPH appears to be more opportunistic with a less clear direction of what it could with the assets. Mapletree has existing interests in PBSA and has recently announced that it has purchased four PBSA assets in the UK. CapitaLand could be interested in the retail assets of SPH.
• HPL is the wild card. This leaves the question of why would Hotel Properties be keen to throw its hat into the ring, given that its existing assets consists largely of hotel assets.  The most often cited explanation is that it is keen on Paragon mall, given that it already owns hotels along Orchard Road including Concorde, Four Seasons and Hilton. Also, it might be worth remembering that Ong Beng Seng and Temasek also formed a consortium back in 2003 to acquire Natsteel, even though it was not linked to HPL’s business interests in any way.

What would Beansprout do?

• Keppel’s offer appears more attractive for now. For now, Keppel’s offer is the best on the table as the offer price of S$2.351 per share exceeds that of Cuscaden’s S$2.10 offer. It is also more certain as it has cleared the regulatory requirements, while any competing offer will require 3-6 months for regulatory approvals with no certainty that they will be obtained. We would not have to wait too long to see how this pans out, as Cuscaden or any interested parties have to make a counter offer by 16 November if they are still keen to acquire SPH.