Axiata mulls Keppel-SPH offer for 28.7% stake in M1

AmInvestment Bank says sale proceed of RM1.7b will improve Axiata’s gearing levels from 1.6x to 1.4x


AXIATA Group Bhd will review all available options for its 28.7% shareholding in Singaporean mobile operator M1 Ltd following a S$2.06 (RM6.24) per share bid tabled by M1’s other substantial stakeholders — Keppel Corp Ltd and Singapore Press Holdings Ltd (SPH).

In a statement yesterday, Axiata reiterated the offer should reflect the accurate future value of M1 inclusive of an acceptable control premium, consistent with market standards.

AmInvestment Bank Bhd, in a research report yesterday, expects Axiata will accept the offer as the associate stake in M1 is not considered a strategic asset in a highly competitive cellular market which needs sustained capital expenditure rollouts.

The investment bank added that the sale proceed of RM1.7 billion will improve Axiata’s gearing levels, with financial year 2019’s net debt to pretax earnings decreasing from 1.6 times to 1.4 times.

Axiata expects the bid price to also offer a comparable premium on precedent transactions within the Asean market.

Any decision will also be based on M1’s historical trading trend, especially when the price has been depressed for more than a year vis-a-vis its true value potential, along with its long-term growth potential and future competitive outlook, the multinational telco operator added.

M1 is the smallest wireless operator in Singapore with Keppel’s arm Keppel Telecommunications & Transport Ltd controlling a 19.3% stake and SPH owning 13.45%.

In a filing to the Singapore Exchange Ltd yesterday, SPH noted it will be making a preconditional voluntary general offer of S$2.06 per share — together with Keppel — for the remaining shares in M1 they do not already own.

The offer is a strategic initiative to gain majority control of M1 to drive business changes to enable the mobile operator to compete more effectively in the industry.

The offer will be made through Konnectivity Pte Ltd, a joint-venture company that is majority-owned by Keppel.

Axiata has also engaged an undisclosed financial institution to act as an advisor on possible buyout offers.

Bloomberg reported that SPH and a Keppel subsidiary had already approached Axiata for its stake in M1, adding that Axiata may choose to make its own offer for M1 if the price announced by SPH and Keppel’s arm is too low.

SPH, Keppel and Axiata in July last year ended a strategic review of their stakes in the mobile carrier after potential buyers for M1 backed out.

Shares of M1, which were halted from trading since Monday, last closed at S$1.63, valuing the firm at S$1.51 billion — down 59% since its high of around S$4 in March 2015.

Apart from seeing falling revenue per user since 2010, the carrier faces intensifying competition in Singapore’s saturated market, with TPG Telecom Ltd set to enter the fray this year.

Axiata closed at RM4.73 yesterday, with a market capitalisation of RM42.9 billion.