Wednesday, September 26, 2018

M1 - Potential GO Dejavu ?

By now, you would have probably heard the news buzzing around surrounding the potential buyout for M1 takeover with two of its largest shareholder Keppel T&T which owns 19.3% and SPH which owns 13.5% dealing with a potential buyer on the cards. 

There’s not much details on the news that have been shared and I can understand why investors are eager to follow up on the story given that this feels like dejavu all over again. In early last year, the 3 big shareholders, namely Axiata, Keppel T&T and SPH went through a similar strategy review when the shares were trading back then around $2.15. Unfortunately, the deal seems to be off and from the way I read the deal, it seems that Axiata has not agreed to the selling while the latter two has preference over divesting their non-core assets. 

In a similar statement made by Axiata yesterday (original script below), it appears that Keppel and SPH decide to proceed ahead with the review given that a successful deal with the two would mean that the acquirer would own a shareholding of above 30%, which would trigger a mandatory GO deal. 

Axiata’s Original Statement Issuance (25th Sep 2018) 

Axiata Group Bhd (“Axiata” or “the Group”) refers to the announcements made today by Keppel Corporation Ltd (KCL) and Singapore Press Holdings Ltd (SPH) to the Singapore Exchange on their joint consideration of a possible transaction involving M1 Limited (“M1"). 

Axiata had on 17 March 2017 and 18 July 2017 previously announced publicly that it was undertaking a strategic review of its stake in M1 jointly with KCL and SPH. Post the said strategic review, Axiata has deliberated with both companies where we made our position clear regarding any corporate action. 

The announcements today by KCL and SPH, as we understand it, may reflect developments from the 2017 strategic review and post discussion, which now has resulted in Axiata not being an active participant in the new corporate exercise. 

Axiata will consider all appropriate and viable options that will enhance our own shareholders’ value depending on the official proposal to be made by KCL and SPH. 

What is the term of a mandatory GO in Singapore? 

The threshold for triggering a mandatory GO for a listed company in Singapore is when a person acquires shares resulting in him or his parties owning 30% or more of the listed company’s voting rights. 

The offer price to the rest of the shareholder must be at least the highest price paid by the acquirer during the offer period or if after the offer period, then the acquirer must increase the offer price to the price paid by the acquirer. 

The minimum acceptance condition must be approved by at least 75% of the rest of the shareholders based on their voting shares. This is the reason why Axiata plays such an important role here because it owns 28.7% of M1 and my understanding is the deal could be off if Axiata backed off from the strategic review once again. This is the problem when you have so many different parties as part of your big shareholders. 

For M1 to continue to remain listed on the market, it must at least retain 10% or more of their voting shares to be held by the public. 

What does it means for you (investors)? 

This could go down to be quite tricky for minority shareholders. 

It appears that to me Keppel T&T is interested to buy up the stakes of SPH and they would make a GO for the rest of the shareholders.

Either that scenario will happen or Keppel and SPH are trying to divest their shares in M1 as they have previously said they wanted to focus on their core areas. For Axiata however, the shareholding in M1 seems to be key to them given it gives them recurring income as part of the associates and from the reports I read, it appears that they are valuing M1 at the valuation of $2/share in their books.

Hence, I believe this is a key critical price for the deal should it go through. 

Thanks for reading.

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  1. Quite true that ktt & sph wanted out or full control of m1.
    I would expect the offer to be at least 14-15× PER.

  2. Congrats! it is $2.06

  3. This is a lousy offer price. Keppel sees value in M1 and hope to short change investors haha. Don't think it will go through 100% because last July when price was around $2.25 to $2.30 range, Axiata had rejected the China Mobile offer which was higher. Why would they agree to $2.06 now? Unless they are cash strapped now. $2.50 is a more acceptabel offer. M1 is a good source or recurring income for them. I am holding out for a higher price.

  4. was hoping that it would be a higher price. darn..

  5. Hi B, I believe the minimum acceptance condition is 50% (and not 75%) of the shares not already owned by the acquirer - this also accords with paragraph 3.1.5 of the offer announcement. This means that the acquirer will have CONTROL of M1, once it owns more than 50% of M1 shares. Am I correct, or did I miss out anything?

    1. Hi Ming Jie

      Thanks for the correction.

      You are right, the conditional is 50% acceptance.