Morningstar | M1 Likely to Be Taken Private at SGD 2.06 per Share
Two of M1's existing shareholders, Keppel and Singapore press holdings, have made a pre-conditional voluntary general cash offer to M1 shareholders to take over the company at SGD 2.06 per share. Given the 26% premium to the prevailing share price and the uncertain near-term future with a new competitor set to launch mobile service within the next six months, we would expect the offer to be successful. We would not anticipate a competing offer given the existing two shareholders already own 33% of the shares and could therefore block any potential rival offer, and our fair value for the company is 25% below the offer price. The only bidder that could make a realistic competing bid would be an existing operator (or TPG) but we would not expect regulatory approval for such a bid at this stage.A firm offer will not be made until regulatory approval is received with an estimated timing at the end of November 2018. There, there is no need for any immediate actions for existing shareholders. We would expect the shares to trade quickly towards the offer price so we raise our fair value to SGD 2.06 from our fundamental SGD 1.54 valuation. Our narrow moat rating is retained. The offeror acknowledges the challenges ahead for the company and the impact these may have on margins and dividends. A private company should be better able to invest and take the near-term margin pain likely inflicted by increased competition from the new entrant and 5G network investment. In effect, we believe existing shareholders are being bailed out.
M1 is a communications company, providing mobile and fixed services to customers. Co. is an operator that provide fourth generation (4G) service, as well as fixed broadband, fixed voice and other services on the Next Generation Nationwide Broadband Network. Co. and its subsidiaries are engaged in the provision of telecommunications services, international call services and fixed services, retail sales of telecommunication equipment and accessories, and customer services. Co. makes available to its mobile and fixed-line customers International Direct Dial services through the 002 and 021 prefixes, as well as a International Calling Card service using prefix 1818.
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