Just yesterday, Temasek has announced that an indirectly wholly-owned subsidiary of Temasek Holdings – Kyanite Investment Holdings will be making a partial offer to acquire 30.55% of shares in Keppel Corporation at S$7.35 per share in cash. You may read more on this here. Currently, Temasek already owns 20.45% of Keppel Corporation and if the deal goes through, Temasek’s total holding will rise to 51%.
At the offer price of S$7.35, it represents a premium of approximately 26% over the last traded price of S$5.84 and a premium of approximately 21% over the volume weighted average price of S$6.07.
Do note, it is not Kyanite Investment Holdings’ intention to to delist or privatise the company and they would want the company to remain listed on SGX.
Before I share some thoughts on this deal, I will be sharing some background on the details of this partial offer and what it means.
Pre-conditions of Partial Offer
The partial offer will be made only if each of the pre-conditions is satisfied or waived (at the discretion of the offeror).
- The Partial Offer must be approved by votes representing more than 50% in value of the valid votes received from Shareholders (the Offeror and its associates cannot vote)
- If the Partial Offer is successful, Temasek’s and the Offeror’s aggregate direct shareholding in the company has to become 51%.
- There are no regulatory impediment prohibiting, materially delaying or restricting the Partial Offer and there is no loss of material licenses held by the Keppel group of companies.
What is a Partial Offer?
A Partial Offer is an offer made to shareholders of a company to purchase some, but not all, of the shares of the company to achieve a pre-determined ownership percentage.
This is different from a General Offer, where the offeror is seeking to purchase all of the shares of the company. Therefore, if the Partial Offer succeeds, the company (Keppel Corporation in this case) will continue to remain listed.
Do note, if the total number of shares tendered by shareholders exceeds the pre-determined number of shares wanted by the offeror, the number of shares to be acquired from a shareholder may be scaled back.
In this case, this Partial Offer is only extended to non-Temasek related shareholders. As such on top of the 20.45% that Temasek indirectly owns, there is another 1.04% interest held by certain Temasek’s independently-managed and operated subsidiaries. Therefore, there is 78.51% held by minority shareholders. Hence, if you are one of these shareholders, you are only entitled to a minimum of 38.91% offer shares (30.55% / 78.51%). You can tender for more but you will only get pro-rated shares being accepted, assuming there are people who did not tender for their own shares.
How does the Partial Offer work?
Thoughts on the Partial Offer
As per the Per-Conditional Offer Document, it stated that the offeror intends to work with the Board of Directors of Keppel Corporation in ‘undertaking a comprehensive strategic review of its businesses’.
With this, the only business segment that should be under scrutiny would be Keppel Offshore & Marine, which has been in the doldrums given the oil & gas saga since 2015. With this strategic review, perhaps one of two things could happen:
1) Keppel Corporation may spin-off its stake of Keppel Offshore & Marine into a separate company.
2) Keppel Corporation rescuing Sembcorp Marine, whose business has too been in the doldrums given the oil & gas saga in 2015. It seems like the stock market is reacting in the similar manner, given how Sembcorp Marine’ and Sembcorp Industries’ prices spiked by 11.67% and 10.10% on this news of a Partial Offer.
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The information provided by InvestingNook serves as an educational piece and is not intended to be personalised investment advice. Readers should always do their own due diligence and consider their financial goals before investing in any stock.
Disclaimer: The Author has vested interest in Keppel Corporation at the time of writing.