Offers for SPH: The path to $2.36 in cash is clear as Keppel’s long-stop date lapses

In Greek mythology, Pegasus was a winged horse and Medusa was its mother. The Greek poet Hesiod wrote that Pegasus carried thunderbolts for Zeus. For some reason, Keppel Corp’s unit that made an offer for Singapore Press Holdings (SPH) is known as Keppel Pegasus.

It so turns out that on Feb 9, SPH said it had told Keppel Pegasus that it is terminating the Keppel Implementation Agreement with immediate effect. According to SPH’s announcement on the evening of Feb 9, the Securities Industry Council (SIC) has no objections to SPH’s exercising of the termination right. The longstop date of Feb 2, 2022 has come and gone. “Not all of the Scheme Conditions of the Keppel Implementation Agreement have been satisfied, nor has the Keppel Scheme become effective in accordance with its terms,” SPH announced.

“With the latest SIC ruling, SPH and Cuscaden can move forward expeditiously to table the Cuscaden Offer for SPH shareholders to vote,” says Christopher Lim, executive director of Hotel Properties and spokesman for Cuscaden Peak, a consortium which has offered $2.36 in cash for SPH shares.

“We have been steadfast in our commitment to deliver a compelling offer to SPH shareholders and our Implementation Agreement with SPH remains in full force. The Cuscaden Scheme, which offers the optionality of an all-cash consideration or a cash and units consideration, provides an opportunity for SPH shareholders to crystallise their investment in SPH at superior value,” Lim adds.

This is music to the ears of SPH’s 60,000 retail shareholders who are wondering what has happened to the offers and scheme meetings that were promised back in November and December 2021.

Separately in an earlier announcement on Feb 9, Keppel Pegasus said it had filed a notice of arbitration with the Singapore International Arbitration Centre (SIAC) to commence arbitration proceedings against SPH. This was in response to the letter Keppel Pegasus received from SPH in January 2022, giving written notice of its intention to consult the SIC in relation to the termination of the implementation agreement dated Aug 2, 2021 entered into between Keppel Pegasus and SPH.

On Feb 9, the SIC said it had no objections to SPH terminating the Keppel Implementation Agreement. This paves the way for SPH to call for a scheme meeting to vote on Cuscaden’s offer, which is the highest offer to date.

On Dec 22, 2021, Keppel Pegasus announced that SIC stipulated two clauses in its agreement with SPH “shall have no effect and shall be disregarded”. These are: i) the Keppel Scheme Meeting shall be held prior to any scheme meeting to be held pursuant to any Competing Offer to be implemented by way of a scheme of arrangement, and ii) SPH shall not take any action to hold an Alternative Scheme Meeting within eight weeks from the date of the Keppel Scheme Meeting.

“The decision whether to approve the Keppel Scheme should be a matter that is left to SPH’s shareholders. This is all the more important as the Keppel Scheme will lapse if not all Scheme Conditions (including the approval of the Keppel Scheme by shareholders of SPH) are satisfied by the Cut-Off Date of 2 February 2022,” Keppel said on Dec 22.

Market observers were already wondering if the Keppel scheme would be put up for a vote by the time Keppel made its Dec 22 announcement. In order to meet the long-stop date deadline of Feb 2, Keppel would have needed to get court approval on Jan 3, dispatch the circular by Jan 20, and hold the scheme meeting by Jan 24.

During Keppel Corp’s results briefing on Jan 27, group CEO Loh Chin Hua had said: “From the Keppel side, we have completed all that we are required to do, including getting our EGM approval. So, all the conditions on our side have been cleared. I think it is really up to SPH now to call the Scheme Meeting for its shareholders to vote and we would like to see that done, obviously, as quickly as possible.”

Yet, in January, there was a sort of stasis when everything associated with the SPH sale appeared to take a back seat.

In view of the increasingly hawkish comments from the US Federal Reserve, the European Central Bank and (shock, horror) the Bank of Japan, SPH shareholders are hoping to receive cash for their shares as soon as possible.

“Any attempt to delay the Cuscaden Scheme process goes against the interest of SPH shareholders and deprives them of the opportunity to vote in favour of the Cuscaden Scheme and receiving value in their investments promptly. We are aligned with SPH shareholders’ interests and will continue to work closely with SPH to ensure that our Offer can be tabled to SPH shareholders as soon as possible,” Lim says.

Cuscaden has two offers for SPH shareholders. The most popular offer is an all-cash offer of $2.36. The second offer comprises cash of $1.602 in cash, and 0.782 SPH REIT unit for every SPH share. Keppel’s offer was for $0.868 in cash, 0.782 SPH REIT and 0.596 Keppel REIT.

“The termination of the Keppel Scheme paves the way for a clearer and more straightforward privatisation and voting process for shareholders to vote on the more superior Cuscaden offer,” CGS-CIMB says in an update.

And finally, that vote should be fast approaching as Pegasus flies away.