SINGAPORE – Singapore Press Holdings (SPH) told shareholders ahead of an extraordinary general meeting (EGM) on Friday afternoon (Sept 10) that winding up or selling its media business was not a feasible option, as such a move “may incur potentially heavy financial costs” and would require regulatory approval.
SPH is seeking shareholders’ approval on its proposed restructuring and formation of a new Constitution, which is needed before a $2.2 billion takeover-cum-privatisation offer by Keppel Corp can proceed.
SPH, which publishes The Straits Times, had announced in May that it will be hiving off its entire media-related business to a company limited by guarantee (CLG), which is a not-for-profit entity that will initially receive financial help from SPH, including $80 million in cash and $30 million in shares.
The amount was arrived at after considering various factors, including the potential funding requirements of the media business for the next few years, SPH said.
Responding to shareholders’ questions on why the board did not consider selling or shutting down the media business, SPH said: “Given the role of the media business in providing a public good and the critical role it plays in the provision of quality news and information to the public, winding up is not an option.”
It pointed out that all options for the media business require approval from the regulator, and the regulator has supported this option.
“The secular decline in traditional print media is a global trend, not unique to Singapore or SPH, which has been further accelerated by the pandemic.
“Given further expected widening losses at the media business, running the business under the current listed company framework – where SPH continues to operate other business lines in addition to the media segment – is not feasible and does not maximise value for shareholders,” SPH said.
In the light of these challenges, the proposed restructuring is considered the best option for shareholders, as it “removes any future funding requirements and potential losses due to the media business”.
In addition, SPH will no longer be bound by the provisions of the Newspaper and Printing Presses Act (NPPA), which will allow it greater flexibility to tailor its capital and shareholding structure to pursue strategic options and growth opportunities across all other businesses, it said.
This is critical as the second part of its restructuring involves Keppel Corp’s $2.2 billion bid to privatise SPH’s non-media business. Under the Keppel offer, SPH shareholders will receive a total consideration of $2.099 per share. This will comprise cash of 66.8 cents per share, as well as 0.596 Keppel Reit unit and 0.782 SPH Reit unit per share.
The deal, which values SPH at $3.4 billion, will take place through a scheme of arrangement, subject to SPH shareholders first approving its media restructuring plan on Friday. At least 50 per cent of participating shareholders are required to vote in favour of hiving off the media business.
On Friday, shareholders will also vote on the conversion of each management share held by a management shareholder into one ordinary share, and the related adoption of a new Constitution. This is to ensure that SPH is no longer subject to the provisions of the NPPA, which limits each shareholding to only 5 per cent.
As this proposal involves a change in the company’s Constitution, the regulatory requirement is a vote of 75 per cent in favour.
The special resolution on the conversion of management shares and new Constitution is contingent upon the passing of the first resolution on the media spin-off.
Both resolutions will need to pass on Friday before the Keppel deal can proceed.
SPH also pointed out that its financial adviser, Evercore, has found that the proposed restructuring “presents key benefits to the company and the shareholders”.
It will allow the company to set a clear strategic direction with “a focus on the real estate sector and related segments of student accommodation and aged care, whilst eliminating its exposure to business risk and uncertainties associated with the media business”.
Evercore forecast that the media business may incur Ebitda (earnings before interest, taxes, depreciation and amortisation) losses of between $59.4 million and $83.6 million per year by financial year 2024.
As these losses are structural and expected to be recurring annually over time, there is the possibility of SPH incurring significant annual losses for an extended period if it were to retain the media business, it said.
This could also significantly impact SPH’s ability to fund growth and pay dividends, while diverting its senior management team and resources away from other strategic initiatives and opportunities.
This supports Evercore’s view that making a $125.8 million financial contribution under the proposed restructuring is more favourable than having to bear the potentially significant and recurring annual losses of the media business going forward if the company were to retain the media business, SPH said.
Before the market opened on Friday morning, SPH requested a trading halt pending the release of announcements. SPH shares closed unchanged at $1.94 on Thursday.