Keppel Corp has commenced arbitration proceedings against Singapore Press Holdings (SPH) for trying to walk away from its takeover offer of the property company.
Keppel, via subsidiary Keppel Pegasus, had offered to takeover SPH last August. Just when most market watchers thought the deal was done, a consortium, Cuscaden Peak, made up of Hotel Properties, Mapletree and CLA Real Estate Holdings tabled a more attractive offer in October.
Both parties, with ties to Temasek Holdings, sweetened their respective offers since then but Cuscaden's, as it stands, still tops Keppel's.
Under terms of the agreement between SPH and Keppel, the latter will receive a break fee of $34 million if the deal falls through. Keppel had also said its revised offer is "final".
Keppel Pegasus is of the "view that SPH is obliged to continue with the implementation of the Keppel Scheme in accordance with the terms of the Keppel Implementation Agreement,” states Keppel in a regulatory filing on Feb 9.
Keppel Pegasus thus filed a notice of arbitration against SPH with the Singapore International Arbitration Centre (SIAC) to dispute and to seek various reliefs against SPH, including specific performance of its obligations.
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“This is in accordance with the terms of the Keppel Implementation Agreement, which provides that any dispute arising out of or in connection with the [agreement] shall be finally resolved by arbitration administered by the SIAC in Singapore," adds Keppel.
Notwithstanding the arbitration proceedings, Keppel does not expect the arbitration to have a material adverse effect on its operations and financial performance.
In its response later in the evening, SPH says it will "vigorously defend its position in the appropriate forum."
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According to SPH, the decision to terminate the agreement with Keppel hinges on a few factors.
For one, the Cuscaden offer, if all cash, is $2.36 for each SPH share. It beats Keppel's $2.351 offer which is to be paid in a mix of 86.8 cents in cash, 0.782 SPH REIT Units and 0.596 Keppel REIT Units for each SPH share.
If SPH shareholders prefer Cuscaden's $1.602 cash plus 0.782 SPH REIT offer instead, that's an even higher offer with an illustrative value of $2.400, although since the offer was tabled, this alternative is now valued at $2.361 based on SPH REIT's Feb 9 closing price.
Correspondingly, Keppel's offer is now worth $2.318, below SPH's Feb 9 closing price of $2.33.
Furthermore, Cuscaden has also cleared the necessary regulatory hurdles. "There is no longer a disparity in terms of timing and regulatory approval process between the Cuscaden Scheme and the Keppel Scheme," states SPH.
In addition, if the Keppel Scheme has not become effective in accordance with its terms on or before 5 pm on Feb 2, 2022, either Keppel Pegasus or SPH may immediately terminate the Keppel Implementation Agreement by notice in writing to the other party, subject to approval by the SIC.
The SIC has ruled that it has no objections to SPH's exercise of the Termination Right.
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“With the latest SIC ruling, SPH and Cuscaden can move forward expeditiously to table the Cuscaden Offer for SPH Shareholders to vote. 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.
“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,” says Christopher Lim, Group Executive Director of Hotel Properties Limited and spokesperson for Cuscaden.
Shares in Keppel closed up three cents or 0.5% at $6.04 on Feb 9, while that for SPH was down a cent or 0.43% to $2.33.
Cover image: file photo
