Keppel Land

Keppel Land: Two-tier voluntary unconditional offer of base offer ($4.38/share) and higher offer price ($4.60/share), with higher offer price given when Keppel Land is taken private (>90% valid acceptances).

Keppel Corp currently has 54.6% control and the offer closes on 12 Mar. However, the offeror has the right to extend the closing date of the offer.

Note that the offer price may include Keppel Land's FY14 dividend of $0.14/share, if the offer extends beyond Keppel Land's XD on 5 May.

We highlight two possible scenarios that may happen:
1) Cum dividend, the base offer price of $4.38 or privatisation price of $4.60 will apply, depending on whether the valid acceptance of the offer reaches the 90% compulsory acquisition threshold.
2) Ex dividend, the effective base offer price of $4.24 ($4.38 less 14¢ dividend) or effective privatisation price of $4.46 ($4.60 less 14¢) will be paid by KEP.

What this means is that buyers above $4.38 are mostly likely to accept KEP’s offer in the hope of cashing out at $4.60.

But existing shareholders, who are not confident that the privatisation will succeed, may want to consider selling to the market in order to have the certainty of locking in their gains.

Conversely, they can hold out for a clearer picture on the possibility of compulsory acquisition before making their decision to accept the cash offer or sell to the market.

Risks to the KEP's deal would include 1) shareholders may find the 7-12% discount to book NAV unattractive, bearing in mind CapitaLand bought out CapitaMalls Asia at a 26% premium to NAV in July 2014, 2) big investors or interested third parties buying up shares now to block the privatisation or 3) emergence of a counter bid.