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Cuscaden Peak to cover $34m break fee if SPH shareholders vote down Keppel offer

Cuscaden Peak to cover $34m break fee if SPH shareholders vote down Keppel offer

Source: Straits Times
Article Date: 26 Nov 2021
Author: Ven Sreenivasan

SPH shareholders were due to vote on the Keppel scheme by Dec 8, but this has now been delayed.

 Cuscaden Peak's offer for the assets of Singapore Press Holdings is superior, compelling and gives shareholders a higher valuation, higher cash component and deal certainty.

Also, Cuscaden Peak is prepared to cover the $34 million break fee if shareholders vote against the Keppel scheme.

That is according to Mr Christopher Lim, group executive director of listed-Hotel Properties and spokesman for Cuscaden Peak - a consortium comprising lifestyle tycoon Ong Beng Seng-controlled Tiga Stars, CapitaLand's Adenium and Mapletree group unit Mapletree Fortress.

"We deliver transaction certainty, with no need to go to our shareholders for approvals," he told The Straits Times in an exclusive interview. "And we will complete the deal by February 2022."

The consortium last week countered Keppel group's $2.351 per SPH share bid with a sweetened offer of up to $2.40 per SPH share.

This scheme comes in two options: $1.602 cash and 0.782 of an SPH Reit unit through a distribution in-specie; or an all-cash option of $2.36 per share.

Cuscaden Peak's offer values SPH at $3.9 billion.

Keppel's final offer of $2.351 comprises 86.8 cents per SPH share plus 0.596 of a Keppel Reit unit and 0.782 of an SPH Reit unit.

Cuscaden Peak has obtained approvals from the Monetary Authority of Singapore and the Infocomm Media Development Authority (for SPH's stake in telco M1) for the takeover, and is now awaiting the nod from the Foreign Investment Review Board of Australia - needed as SPH also has properties there.

SPH's independent directors have recognised the Cuscaden Peak offer as superior to Keppel's and have made a preliminary recommendation (subject to the opinion of the independent adviser) for SPH shareholders to vote against the Keppel scheme.

SPH shareholders were due to vote on the Keppel scheme by Dec 8, but this has now been delayed.

If shareholders prefer Cuscaden Peak's offer, they will have to vote against the Keppel scheme at that meeting.

A week or two later, they are likely to be called back to vote for the Cuscaden scheme.

If they vote for this scheme, each shareholder will later be asked to select their preferred option for payment by Cuscaden Peak - either all-cash or cash-plus-SPH Reits.

Under an agreement between SPH and Keppel, SPH cannot dispatch Cuscaden's scheme to shareholders within eight weeks of the Keppel scheme meeting. But if shareholders vote against the Keppel scheme, the Cuscaden scheme meeting can be held within days after that.

Also, if SPH shareholders vote down the Keppel offer, Keppel can claim a $34 million break fee.

"We will be writing a much bigger cheque to SPH shareholders," said Mr Lim. "We will also have to provide another $1 billion for a potential chain offer for SPH Reits and make contingency for the redemption of SPH's bonds."

SPH has $950 million worth of bonds outstanding, of which $450 million are perpetuals.

A chain offer for SPH Reits will be triggered if Cuscaden Peak has to buy up a significant amount of the units to compensate SPH shareholders who choose the cash-plus-units payment option.

In all, Mr Lim estimates that Cuscaden Peak may have to set aside as much as $6 billion to take over SPH. He said the financing is fully backed by investment bank Morgan Stanley, which is advising Cuscaden Peak on the deal.

But why are the three partners in this consortium so keen on SPH's portfolio and why do they need to come together to do this?

"All three of us are real estate players," Mr Lim said. "Instead of buying piecemeal, we saw an opportunity to buy a portfolio consisting of some pretty good assets. This (portfolio) meets the requirements of all the (consortium) members."

These assets include Paragon in Orchard Road, Clementi Mall, Rail Mall and other assets in Singapore. Overseas assets include purpose-built student accommodation in Britain and Germany, and malls in Adelaide and Sydney. It also owns Orange Valley aged homes in Singapore.

Mr Lim declined to disclose what the Cuscaden Peak consortium would do with the portfolio after acquisition, and whether it would break up and divide the spoils.

"We can't discuss our business plans yet," he said. "We will take guidance and advice from the CEO Ng Yat Chung and his team. But we have relative strengths and advantages.

"Unlike Mapletree and CapitaLand, HPL is not into real estate investment trusts (Reits). But we are an established player in hospitality, branding and retailing."

Mr Lim also credited SPH's management - previous and current - for helping build up a significant property portfolio.

"He (Mr Ng) has done a great job and success in a venture like this is not possible without good people," he said, adding that the consortium would look to absorb most of the staff of SPH, including senior management.

This is not the first time an Ong Beng Seng-led consortium has mounted a takeover bid for a listed company in partnership with Temasek-linked entities.

In 2002, Mr Ong led the 98 Holdings consortium to bid for steelmaker NatSteel and narrowly won against a competing bid from tycoon Oei Hong Leong.

Source: Straits Times © Singapore Press Holdings Ltd. Permission required for reproduction.

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