A newly-formed consortium backed by powerful names upset what had appeared to be a done deal between Keppel and Singapore Press Holdings (SPH).

Cuscaden Peak, a consortium comprising Hotel Properties Limited (HPL), its co-founder Ong Beng Seng, and two Temasek-linked entities, CLA Real Estate and Mapletree, have proposed an offer to SPH. 

The consortium is offering to acquire SPH for $2.10 per share in cash. 

With the new development, Keppel Corporation’s offer, which values SPH at $3.4 billion, will be challenged. 

Under terms of the offer between SPH and Keppel, the latter now has "the opportunity, within ten business days, to improve their current proposal".


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See: Consortium comprising Temasek, Mapletree, Ong Beng Seng and Hotel Properties make rival offer for SPH


Keppel’s offer, when announced in August, was worth $2.099. It is to be met in a mix of 66.8 cents in cash, 0.596 Keppel REIT units and 0.782 SPH REIT units per share, which would leave SPH minorities with odd lots.

The proposed consideration will not be reduced or adjusted for the final dividend declared by SPH for the FY2021, or break fee payable under the Keppel scheme.

Despite the surprise move, Cuscaden Peak’s proposal is not a rival offer, says Justin Tang, director and head of Asian research at United First Partners. 


See also: Keppel Corp makes $2.2 bil offer to acquire SPH's non-media portfolio; SPH valued at $3.4 bil


“I don’t look at it as a rival offer. Temasek is at the centre of these two transactions, something must have changed for this to have come about,” says Tang to The Edge Singapore

According to Tang, Ong “probably tabled a proposal that looks more attractive than whatever Keppel was trying to do”. 

Tang expects SPH’s board to recommend the latest offer. “The $2.10 [cash offer per share] would be a cleaner exit for minority shareholders. I’m sure there are some minority shareholders who are not willing to take Keppel’s cash and scrip offer. It would mean they are still tied to REITs, and some might want to make a clean exit.”

Based on current market prices, Keppel’s offer is worth $2.08 per share, slightly lower than the offer from the consortium, notes DBS Group Research. 

“Keppel may potentially look to counter-offer its bid to acquire SPH given the higher offer from the consortium. The 100% cash offer from the consortium may also be viewed as more attractive relative to getting SPH REIT and Keppel REIT units,” writes DBS Group Research. 

“Separately, Keppel REIT’s share price may react positively with Keppel Corporation set to maintain its approximately 46% stake in the REIT and as concerns on investor selling post-deal reduce,” adds the research house. 

Crown jewel

What does the consortium see in SPH? The answer lies in what comes with it; namely, Paragon Shopping Centre, The Woodleigh Mall, Seletar Mall and others. 

Ong, through his 25.5% stake in HPL, owns “large portions of assets in Orchard Road”, says Tang. The company’s hotels here include the Concorde Hotel, Four Seasons Hotel and Hilton Hotel.

Ong and Temasek are no strangers to doing deals together. Back in 2003, they were part of a consortium that won a closely-fought fight for Natsteel.

“SPH owns SPH REIT, which owns Paragon. It just makes sense if he wants to rejuvenate Orchard Road,” Tang adds. “Think about his pedigree, the guy brought the Formula 1 franchise to Singapore; he clearly knows what he’s doing in hospitality, which is something that the country currently needs in this pandemic.”

“I think the crown jewel for Ong is the Paragon mall. That’s my view,” says Tang. 

Temasek unit CLA Real Estate owns property group CapitaLand. It is the majority owner of CapitaLand Investments.

“If you look at other SPH assets, you have data centres, and Mapletree has expertise in that. You have urban developments in Woodleigh, Seletar Mall, things that CapitaLand has expertise in. They will probably split the assets up there,” says Tang. 

On Aug 30, Mapletree announced that it had purchased four purpose-built student accommodation (PBSA) assets in the UK. SPH also owns student accommodation in Britain and Germany, as well as a private nursing home in Singapore and aged care assets in Japan.

“Ong’s proposal to Temasek, or the other members of the consortium, must have been so compelling, they were probably like, ‘Let’s do this. This is transformational.’,” says Tang. 

Meanwhile, OCBC Credit Research analysts think the potential bid is a better fit for Mapletree than HPL. 

“The move by HPL is particularly surprising to us, given the different assets held by SPH compared to its predominantly hotel portfolio,” write OCBC analysts in an Oct 29 note.

“In addition, HPL has faced significant cash outflows due to the cash bleed from its hotels segment, with PBIT (profit before interest and tax) loss of $11.6 million in 1HFY2021,” add OCBC analysts. “We think the acquisition, if completed, may constrain HPL’s capacity to raise further financing.”

Mapletree's 30% stake in the consortium would translate to a $1 billion cash outlay if this competing deal for SPH goes through, versus its $1.9 billion of unrestricted cash on balance sheet as at March 31, 2021, note OCBC analysts.

Similar to SPH, Mapletree has a sizeable portfolio in student accommodation since entering the asset class in March 2016. As at March 31, 2021, Mapletree's total assets and book value equity was $53.6 billion and $30.0 billion respectively. “In our view, this is a manageable transaction for Mapletree,” say OCBC analysts.

The Edge Singapore understands that some other parties have, at various points in time, been known to be keen to throw their hats into the ring, including those from Thailand and China.

Could this surprise move embolden them to do so? Tang thinks otherwise. 

“There won’t be a third offer. The offer by Keppel was done a few months back; we have not seen any counter-offers; there will not be any,” says Tang. 

Eing Kar Mei, analyst at CGS-CIMB Research, is more optimistic about SPH’s luck with suitors. "SPH has good quality assets so we do not discount the possibility of seeing more bidders.”

According to Eing, SPH's student accommodation and aged-care assets would be particularly attractive to investors as the two segments are seen as resilient.

Notably, while SPH and SPH REIT have called for a trading halt, HPL and Keppel did not.

“The fact that Keppel and HPL’s prices are trailing up shows that the market is taking this positively. If the SPH board makes a quick recommendation, it will run on the same timeframe as a scheme of arrangement,” says Tang. 

“But bear in mind that the media restructuring needs to happen first. That will be the driver of the timetable,” he adds.

SPH shareholders have given the go-ahead in an EGM for the media business to be taken out and the restructuring is scheduled to be completed by end of the year.

“Hunter or hunted”

There have been some signs that the entire multi-stage restructuring of SPH is not a done deal. Analysts had been questioning the deal as recently as two days before Cuscaden Peak entered the fray. 


See also: With potential SPH merger, analysts ask if Keppel REIT is the hunter or the hunted


In an Oct 27 note, UOB Kay Hian Research analyst Jonathan Koh asked if Keppel REIT was “the hunter or the hunted”, as SPH REIT has a significantly lower aggregate leverage of 30.3%, compared with Keppel REIT’s 37.6%.

“Assuming that both S-REITs’ aggregate leverage are capped at 40%, we estimate that SPH REIT has a larger debt headroom of $667 million compared with Keppel REIT’s $350 million,” says Koh. 

SPH REIT also has a lower cost of debt of 1.84%, compared to Keppel REIT’s 1.99%. “Thus, SPH REIT has a greater chance of making the acquisition yield accretive by deploying more debts. Keppel REIT could be the acquiree,” writes Koh. 

In response to the “unsolicited proposal”, SPH issued a statement in the afternoon of Oct 29 that its board is “considering the proposal” and “will act in the best interests of all shareholders and in accordance with its fiduciary duties”.

“The Board wishes to highlight that the Proposal is not a firm offer by Cuscaden for all the Shares. The Company and Cuscaden have not entered into any definitive or binding agreement in relation to the Proposal and there is no assurance that any transaction will materialise or that any definitive or binding agreement will be reached with Cuscaden,” writes SPH. 

“The Company remains bound by the terms of the implementation agreement entered into with Keppel Pegasus on Aug 2, 2021.”

Shares in SPH reached an all-time low of 99 cents in October 2020. The stock closed at $1.99 on Oct 28.

As at 4.12pm, shares in HPL are trading 20 cents higher, or 6.1% up, at $3.50; and shares in Keppel REIT are trading 4 cents higher, or 3.6% up, at $1.14.

Photo: Samuel Isaac Chua / The Edge Singapore