Keppel Limited

[GFG]

Hi GFG,

You have mixed up the formatting above and make it very difficult to read.
Or are you trying to confuse me ?

Ok, I cut and paste what you wrote above :

GFG wrote :
" Hi, thanks for the clarification.
Yes, these are the 2 scenarios you have highlighted.
I was trying to say that in the event that Keppel corp gets an 89% stake, yes, Keppel land stays listed, but the share price will likely drop substantially upon the expiry of the offer. (It was below $4 before this offer). Keppel corp can then gradually buy more shares on the open market over time. (at a lower price too)
Once it hits 90%, free float <10%, it can then force a delisting by not trying to increase its free float. "

hah, that happens when you try to type on a smartphone.

[GFG]

Hi Boon,

Thanks for the info.

Hi Boon,

Can you explain to me how a scenario 3 could happen.

I think 3 scenarios could happen at the close of the offer:

1) If KepCorp crosses the compulsory acquisition threshold (>90%) => compulsory acquisition and delisting of KepLand
2) If KepCorp fails to cross the compulsory acquisition threshold ( < 90% ) BUT KEPland still meets the “free float” requirement of the Listing Manual (i.e. at least 10 per cent of the total number of issued Shares are held by at least 500 Shareholders who are members of the public) => KepLand would remain listed.
3) If KepCorp fails to cross the compulsory acquisition threshold ( < 90% ) AND KepLand does not meet the “free float” requirement of the Listing Manual => KepLand would be delisted until the "free-float" condition is restored.
" In the event the Company does not meet the free float requirements of the Listing Manual, the Offeror does not intend to maintain the present listing status of the Company and accordingly, does not intend to place out any Shares held by the Offeror to members of the public to meet the Shareholding Requirement. "

KepCorp holds 89%, less than 500 other shareholders who are members of the public hold the other 11%.

Hi Boon and Layman A

Scenario 3 technically cannot happen straight away. Because if KepCorp fails to cross the 90% threshold, that means at least 10% is "free float" aka in the hands of the public. So the company will not get delisted.

I am just trying to say that that's not a good scenario for minority shareholders because the share price will drop after the offer expires, and there's nothing to stop Kepcorp from accumulating slowly to eventually reach 90%. It just takes a bit longer but after everything is done and dusted, they can actually accumulate at a lower price.

They just have to accumulate to reach 90%, and they have already indicated their intention to purposefully NOT maintain an adequate free float to force a delisting.

This happened to Pertama Holdings just a few years back. I was one of the minorities that accepted the buyout offer, but they couldn't trigger the 90% threshold. So those who didn't accept, got stuck. The share price was in limbo for over a year, with very low liquidity. (Most of the shares were held by the major shareholder)

[Layman A]

Hi GFG and Boon,
Thanks for sharing your thought and knowledge.

The 90% and 500 public member shareholders requirement
Both of you sounds logical, but I check up SGX website and there is no clear cut rules that state clearly what will happen if the situation of Keppel acquire only 89% but the minority shareholders fall below 500 .
Can SGX clarify on this matter please.
And if there is really a loophole that the controlling stake holder can use to exploit the minorities .....
Mr Magnus Bocker , can you do us a good deed to rectify this problem please.

[Layman A]

Ok, I did a quick check on the previous CK Tang delisting offer, and this is what I have found :

https://singaporepropertyhighlights.word...sh-carrot/

http://news.asiaone.com/News/The+Straits...cheme.html

https://www.scribd.com/doc/210213149/1/C...vatisation

You can follow the links above to find out the details, but I'll summarize the critical facts here for easy reading :

1. A controlling shareholder cannot forced a SUSPENSION of trading if they did not trigger the critical 90% threshold.
As in the case of CK TANG, the 90% threshold was not met. So the controlling shareholder cannot force delist the company even though there was only 470 minority shareholders.

2. After failing to delist CK Tang in the first two attempts, controlling shareholder attempt to using "Option Scheme" to dilute the minority shareholding in 2007. The delisting was not successful.

3. In a final delisting push in 2009, CK Tang offer $0.83 to the minorities, and forced thru the privatization in a controversial voting.

3. Angry minorities complaint to SIAS, which in turn ask regulators to intervene.

4. In 2011, the remaining minority shareholders was cancel out in a capital reduction exercise with a final price of $1.30 .

5. Finally my observation :
The hardcore minority shareholders gets a final offer of $1.30, which is 3.1x of the first privatization offer of $0.42 .

So, being stuck in an illiquid stock post privatization is not necessary a bad thing.

[Layman A]

Hi grubb,
You are sharp !
I agreed that this delisting offer will have a high chance of failing.
But I am confident that Keppel would extend the offer with a better offer price higher than $4.60 .

Hi Boon,

Can you explain to me how a scenario 3 could happen.

I think 3 scenarios could happen at the close of the offer:

1) If KepCorp crosses the compulsory acquisition threshold (>90%) => compulsory acquisition and delisting of KepLand
2) If KepCorp fails to cross the compulsory acquisition threshold ( < 90% ) BUT KEPland still meets the “free float” requirement of the Listing Manual (i.e. at least 10 per cent of the total number of issued Shares are held by at least 500 Shareholders who are members of the public) => KepLand would remain listed.
3) If KepCorp fails to cross the compulsory acquisition threshold ( < 90% ) AND KepLand does not meet the “free float” requirement of the Listing Manual => KepLand would be delisted until the "free-float" condition is restored.
" In the event the Company does not meet the free float requirements of the Listing Manual, the Offeror does not intend to maintain the present listing status of the Company and accordingly, does not intend to place out any Shares held by the Offeror to members of the public to meet the Shareholding Requirement. "

KepCorp holds 89%, less than 500 other shareholders who are members of the public hold the other 11%.

Doing this exercise out of curiosity.

Kepland has 1,545,288,730 shares outstanding at the moment. Let's assume Kepcorp holds 89.9% and there are 499 other shareholders holding the 10.1%. And let's assume Blackrock is one of those who do not tender. Blackrock holds 3.245% by themselves, so the remaining 498 shareholders holds 6.855%.

This means at current price of $4.54, 498 shareholders will on average each own $965,703 worth of Kepland shares. Obviously, their portfolio is not entirely made up of Kepland. So lets assume each of the 498 shareholders have 10% of their portfolio in Kepland, which make all of them worth ~10mil.

I know Singapore is a rich man place, but I don't think there's 498 10millionaires sitting around with Kepland shares (although you never know).

Its very much more likely that these shareholders will have sold their shares on the market now at 4.54, so if the freefloat is >10%, the number of shareholders will be vastly more than 500.

Alternatively, if the freefloat is >10% and number of shareholders is <500, Kepland will put up a notice to warn of trading suspension. Being a GLC, I doubt Kepland will be delisted while there are still minorities holding on. Minorities will know the game is up and they will quickly tender to get their $4.60.

So right now the problem is as Layman A pointed out. You wait for me, I wait for you. In the end nobody tender and the delisting fails.

Thats just my guess. Did this make sense?

[Layman A]

Today KPMG issue a very funny advise :
" KepCorp's offer is not fair but reasonable "
https://sg.news.yahoo.com/offer-privatis...ector.html

They state that the SOTP value of Kepland is $6.58, but they argue that the offer price is reasonable because the median trading price of Kepland for the past 3 years is very low !
Being a player and referee at the same time !
Independent Adviser ? My foot !

How about we compromised at a mid-price between $4.38 and $6.58,
work out to be $5.48 per share ? How's that sound ?

[Boon]

Hi Boon,

Thanks for the info.

Hi Boon,

Can you explain to me how a scenario 3 could happen.

I think 3 scenarios could happen at the close of the offer:

1) If KepCorp crosses the compulsory acquisition threshold (>90%) => compulsory acquisition and delisting of KepLand
2) If KepCorp fails to cross the compulsory acquisition threshold ( < 90% ) BUT KEPland still meets the “free float” requirement of the Listing Manual (i.e. at least 10 per cent of the total number of issued Shares are held by at least 500 Shareholders who are members of the public) => KepLand would remain listed.
3) If KepCorp fails to cross the compulsory acquisition threshold ( < 90% ) AND KepLand does not meet the “free float” requirement of the Listing Manual => KepLand would be delisted until the "free-float" condition is restored.
" In the event the Company does not meet the free float requirements of the Listing Manual, the Offeror does not intend to maintain the present listing status of the Company and accordingly, does not intend to place out any Shares held by the Offeror to members of the public to meet the Shareholding Requirement. "

KepCorp holds 89%, less than 500 other shareholders who are members of the public hold the other 11%.

Hi Boon and Layman A

Scenario 3 technically cannot happen straight away. Because if KepCorp fails to cross the 90% threshold, that means at least 10% is "free float" aka in the hands of the public. So the company will not get delisted.

I am just trying to say that that's not a good scenario for minority shareholders because the share price will drop after the offer expires, and there's nothing to stop Kepcorp from accumulating slowly to eventually reach 90%. It just takes a bit longer but after everything is done and dusted, they can actually accumulate at a lower price.

They just have to accumulate to reach 90%, and they have already indicated their intention to purposefully NOT maintain an adequate free float to force a delisting.

This happened to Pertama Holdings just a few years back. I was one of the minorities that accepted the buyout offer, but they couldn't trigger the 90% threshold. So those who didn't accept, got stuck. The share price was in limbo for over a year, with very low liquidity. (Most of the shares were held by the major shareholder)

Hi GFG & Layman A,

Under the the “takeover-code/companies act”, once, the Offeror crosses the 90% compulsory acquisition threshold level, the “public free-float” would be less than 10% - hence delisting.

Under the SGX-Listing-rules, if public free-float condition no longer complys – SGX would delist the company until the public free-float condition is restored.

These are two separate rules

As for Pertama, HN holds only 83.1% (< 90%), and it was delisted because the free-float was at 7.77%

Presumably, the remaining 9.14% was held by SSH who are not a concerted party to the Offeror and whose shareholding would not be counted as “free-float”.
________________________________________________________________________________________________________________
Electronics company Pertama Holdings told to delist from SGX, exit offer to be made
Published on Jul 8, 2013
http://www.straitstimes.com/breaking-new...be-made-20

By Fiona Chan

The Singapore Exchange (SGX) has directed Pertama Holdings, a retailer, wholesaler and distributor of consumer electronics products in Singapore and Malaysia, to delist from the bourse.

This comes as shares in Pertama have been suspended from trading since January 27 last year, after the proportion of shares in public hands fell below 10 per cent. Only about 7.77 per cent of Pertama's total issued ordinary shares are held by the public.

The controlling shareholder, Harvey Norman Singapore, and its 60 per cent subsidiary Harvey Norman Ossia (Asia) together hold 83.16 per cent of Pertama's shares.

Harvey Norman said in a statement on Monday morning that it has no intention to restore Pertama's public float to enable it to continue its listed status.

[grubb]

Ok, I did a quick check on the previous CK Tang delisting offer, and this is what I have found :

https://singaporepropertyhighlights.word...sh-carrot/

http://news.asiaone.com/News/The+Straits...cheme.html

https://www.scribd.com/doc/210213149/1/C...vatisation

You can follow the links above to find out the details, but I'll summarize the critical facts here for easy reading :

1. A controlling shareholder cannot forced a SUSPENSION of trading if they did not trigger the critical 90% threshold.
As in the case of CK TANG, the 90% threshold was not met. So the controlling shareholder cannot force delist the company even though there was only 470 minority shareholders.

2. After failing to delist CK Tang in the first two attempts, controlling shareholder attempt to using "Option Scheme" to dilute the minority shareholding in 2007. The delisting was not successful.

3. In a final delisting push in 2009, CK Tang offer $0.83 to the minorities, and forced thru the privatization in a controversial voting.

3. Angry minorities complaint to SIAS, which in turn ask regulators to intervene.

4. In 2011, the remaining minority shareholders was cancel out in a capital reduction exercise with a final price of $1.30 .

5. Finally my observation :
The hardcore minority shareholders gets a final offer of $1.30, which is 3.1x of the first privatization offer of $0.42 .

So, being stuck in an illiquid stock post privatization is not necessary a bad thing.

I dug out this old post from our forum which explains why CK Tang delisted but did not exercise their compulsory acquisition option upon crossing 90%.

http://www.valuebuddies.com/thread-1057-...l#pid61412

[grubb]

Today KPMG issue a very funny advise :
" KepCorp's offer is not fair but reasonable "
https://sg.news.yahoo.com/offer-privatis...ector.html

They state that the SOTP value of Kepland is $6.58, but they argue that the offer price is reasonable because the median trading price of Kepland for the past 3 years is very low !
Being a player and referee at the same time !
Independent Adviser ? My foot !

How about we compromised at a mid-price between $4.38 and $6.58,
work out to be $5.48 per share ? How's that sound ?

Hi Layman A,

I think the offer cannot be increased anymore. If i recall correctly, once the company states clearly on the offer letter that it does not intend to revise the offer, it cannot do so anymore.

[b]2.4 No Revision of Offer Price. The Offeror does not intend to revise the Offer Price.[/b]

[grubb]

Every time a new offer comes out I learn something new about the Companies Act. It turns out that in this case, the minimum threshold for Keppel Corp before they can exercise compulsory acquisition is >95%. See below for the extract from page 12 of the offer letter:

========================
For the avoidance of doubt, the Offeror will extend the Higher Offer Price to all Shareholders, including those Shareholders who, at the date on which the Compulsory Acquisition Threshold is reached, have already accepted the Offer. For purely illustrative purposes only, based on a total number of:

(i) 1,545,288,730 issued Shares (excluding treasury shares) as at the Latest Practicable Date, in order for the Compulsory Acquisition Threshold to be reached, the Offeror must acquire or agree to acquire (whether pursuant to valid acceptances of the Offer or otherwise) an additional 40.9 per cent. of the total number of issued Shares, which when aggregated with the number of Shares owned, controlled or agreed to be acquired by the Offeror as at the date of the Offer, represents 95.5 per cent. of the total number of issued Shares; and

(ii) 1,625,703,507 issued Shares (excluding treasury shares), being the maximum potential issued share capital of the Company , in order for the Compulsory Acquisition Threshold to be reached, the Offeror must acquire or agree to acquire (whether pursuant to valid acceptances of the Offer or otherwise) an additional 43.3 per cent. of the maximum potential issued share capital of the Company, which when aggregated with the number of Shares owned, controlled or agreed to be acquired by the Offeror as at the date of the Offer, represents 95.2 per cent. of the maximum potential issued share capital of the Company.

=====================================
And the reason is because of a difference in company act 215(1) and 215(3). I went to read the company act but I still dont understand the difference. From page 21 of the offer letter:

====================================
Dissenting Shareholders have the right under and subject to Section 215(3) of the Companies Act, to require the Offeror to acquire their Shares in the event that the Offeror, its related corporations or their respective nominees acquire, pursuant to the Offer, such number of Shares which, together with the Shares held by the Offeror, its related
corporations or their respective nominees, comprise 90 per cent. or more of the total number of issued Shares as at the final Closing Date of the Offer. Dissenting Shareholders who wish to exercise such right are advised to seek their own independent legal advice. [u]Unlike Section 215(1) of the Companies Act, the 90 per cent. threshold under Section 215(3) of the Companies Act does not exclude Shares held by the Offeror, its related corporations or their respective nominees.[/u]
=====================================

However, if the freefloat drops below 10%, the company will be suspended. I think Boon meant suspended not delisted right?

Also Zaobao yesterday mentioned that the level of acceptances will only be announced daily after it has crossed 72%.

Taking all the information into account, I believe that delisting is likely to fail.

(1) The minimum threshold is higher than the 90% that I thought.
(2) Because Kepcorp has stated that it will not revise the offer, and because the offer is structured in such a funny way, I believe rational shareholders will rather sell on the market than tender their shares. New shareholders who bought on the market will not be so silly to tender $4.38 and lose money. They will rather wait for other people to tender to be sure they can get $4.60.
(3) The despatch date was 12 Feb. It is already halfway through the tender period but 72% is still not crossed yet. The closing date is on 12 March 2015. I believe that an extension will be likely.

If the price drops upon failure, it may be a good chance to acquire Keppel Land shares and wait for the next offer 1 year later. I believe there is a 12 month moratorium on a new offer if the current offer fails, just like Pertama.

Did I get anything wrong? What does everyone think?