Is Keppel’s proposed acquisition of SPH a good move?

Analysts are optimistic that the proposed takeover will allow Keppel to expand its property and asset management reach.

  • Keppel Corporation (SGX: BN4) shares rose back up 1.8% on Wednesday (04 August 2021)
  • The conglomerate resumed trading on Tuesday, but closed 1.3% lower
  • It announced a scheme of arrangement to acquire all of the issued and paid-up ordinary shares of Singapore Press Holdings, excluding its media assets
  • UOB and CIMB analysts foresee upsides for Keppel in the long run
  • Interested in trading Keppel shares? Open an account with us to get started.

Keppel stock price: what’s the latest?

Shares of Keppel Corporation, which recently proposed a S$2.2 billion strategic acquisition of Singapore Press Holdings’ (SPH) non-media assets, are back on the rise.

As at 14:00 SGT on Wednesday, Keppel shares are trading at S$5.55 each, up 1.8% on the day.

The conglomerate resumed trading on Tuesday, following a halt that took place a day earlier, when the announcement was made. Shares closed the session 1.3% lower.

UOB analysts view Keppel’s acquisition proposal ‘positively’ as they believe it allows the company to ‘enter new property segments, expand its asset management reach and generate more recurring income’.

On the other hand, the offer ‘could be higher’ from SPH’s perspective, ‘but not by much’, they added.

They retained a ‘buy’ recommendation and target price of S$6.48 on Keppel shares.

CIMB, which has an ‘add’ rating and fair value estimate of S$6.90 on the stock, sees ‘synergy between SPH ex-media and Keppel Corp’s capabilities in asset management, urban development and connectivity’.

They foresee upsides to their current dividend forecast for FY2022 to FY2023, on the expectation that Keppel Capital’s assets under management will grow to an estimated S$47 billion post-acquisition, among other predictions.

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What are the details of the proposed acquisition?

Keppel will acquire all of the issued and paid-up ordinary shares in the capital of SPH (excluding treasury shares), with the intention to delist and privatise SPH, following the carve out of the SPH media assets.

This will take place via a scheme of arrangement through its wholly-owned subsidiary, Keppel Pegasus Pte Ltd.

Keppel Pegasus, the offeror, will offer an implied aggregate consideration of about S$2.24 billion, comprising cash of S$1.08 billion and around 26% of Keppel REIT units worth about S$1.16 billion to SPH shareholders, under the terms of the scheme.

SPH shareholders will be entitled to S$0.668 cash and 0.596 Keppel REIT unit for every SPH share held.

Additionally, SPH will concurrently distribute in specie around 45% of its stake in SPH REIT valued at about S$1.16 billion to SPH shareholders, while retaining a 20% stake in SPH REIT.

SPH shareholders will be entitled to 0.782 SPH REIT units for every SPH share held. This has been valued at S$0.716 per share.

All in, SPH shareholders will be receiving an implied S$2.099 per SPH share. This represents a 16.2% premium over the one-month volume weighted average price of SPH’s shares as of 30 July 2021 and a 11.6% premium over the closing price on 30 July 2021.

The proposed transaction is expected to be completed by December 2021, and is subject to approvals by Keppel’s and SPH’s shareholders at their respective extraordinary general meetings in the coming months, regulatory approvals, and the sanction of the scheme by the High Court of Singapore.

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