Keppel Corporation Limited and Singapore Press Holdings Limited Seek Majority Control of M1 Ltd

Keppel Corporation Limited (SGX: BN4), together with Singapore Press Holdings Limited (SGX: T39), wish to gain majority control of M1 Ltd (SGX: B2F) to drive business changes in M1 to enable the telco to compete more effectively in the telecommunications industry.

The offer will be made through a joint venture company, Konnectivity Pte Ltd. Keppel Corp holds an 80% stake in Konnectivity, with the remaining 20% in the hands of Singapore Press Holdings.

As of 26 September 2018, Keppel Corp (through Keppel Telecommunications & Transportation Ltd (SGX: K11)) and Singapore Press Holdings collectively controlled 33.27% of M1. As of 5 March 2018, Keppel Corporation held 79.2% of Keppel Telecommunications & Transportation (Keppel T&T).

The offer price for M1 is set at S$2.06 per share, which gives the telco a price-to-earnings (PE) ratio of 14.3, and represents a 26% premium to the telco’s last traded share price of S$1.63 on 21 September.

The deal is subject to approval necessary from the Info-communications Media Development Authority (IMDA).

Rationale for the offer

By gaining majority control of M1, Keppel Corp and Singapore Press Holdings think that they would be able to undertake an extensive business transformation at the telco to deal with the fast-changing landscape and increasing competition in the Singapore telecommunications sector. The Australia-based TPG Telecom is set to be the fourth telco player in Singapore.

Loh Chin Hua, the chief executive of Keppel Corp, explained:

“Keppel and SPH have been long-term shareholders of M1 since the 1990s. Notwithstanding the challenges currently facing the industry, we see considerable potential in M1 and have developed a transformation plan to sharpen M1’s competitiveness. Through majority control, we would, together with SPH, be better able to support M1’s management to drive changes and create greater value in the company.

However, while we are confident about the long-term potential of M1, the transformation is a complex undertaking that will take several years. The Offer allows shareholders of M1 who are not prepared to wait and bear the related risks to realise their investment in M1 upfront.”

Privatisation of Keppel T&T

Keppel Corp has also announced a scheme of arrangement to privatise Keppel T&T in a cash offer at a price of S$1.91 per share. The takeover price is a 40% premium over Keppel T&T’s last traded price of S$1.36 on 21 September. Loh commented on the acquisition:

“The Scheme will similarly allow Keppel T&T’s minority shareholders, who may be concerned about the prospects of M1 in the face of heightened competition, to make a clean cash exit from Keppel T&T at a substantial premium.”

The scheme price values Keppel T&T at a PE ratio of 16.4.

[ Editor’s note: The sentence describing Keppel Corp, Keppel T&T, and Singapore Press Holdings’ collective ownership has been changed to avoid confusion. The original reads: As of 26 September 2018, Keppel Corp, Singapore Press Holdings, and Keppel Telecommunications & Transportation Ltd collectively controlled 33.27% of M1.]

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.