Daily BriefsSingapore

Singapore: Keppel Corp, Accordia Golf Trust and more

In today’s briefing:

  • What Triggers a Temasek Decision on Keppel?
  • Accordia Golf Discord Dismissed, Accord Reached. With a Bump.

What Triggers a Temasek Decision on Keppel?

By Travis Lundy

When most of us saw the results announcement for Keppel Corp (KEP SP) last week it was most likely a surprise. It is eminently possible that under the Offer, Temasek had pretty good information about what the numbers would be like prior to them being released. If not, then one would expect their advisors did and could advise them. 

When Temasek came out with their statement on August 3rd saying they had not yet decided whether to invoke or waive the pre-condition which was breached as a result of Keppel’s Q2 2020 earnings report, the only real clarification was that a decision would be made by 31 August 2020.

The question for investors has multiple layers. 

  • If this MAC breach would trigger withdrawal, why not announce right away?
  • If Temasek has decided not to withdraw immediately, and several days have passed, one assumes that Temasek’s decision is contingent on something else. The question is… what is that other thing?
  • And if we can identify that other thing, are there multiple possible outcomes? Or only two?

More discussion below, and a refresh of implied withdrawal likelihood charts.

Accordia Golf Discord Dismissed, Accord Reached. With a Bump.

By Travis Lundy

Accordia Golf (used to be 2131 JP, now private) was once a single unit. It managed and owned 100+ golf courses across Japan and was, at the time, the largest listed golf course business in Japan. In November 2012, rival PGM launched a hostile Tender Offer to take 51% of Accordia Golf at ¥81,000/share.

This was seen as low, and Accordia did not want to give up to its rival, but there is only so much a target can do on its own. The opportunity of the tender offer and its aftermath allowed funds operated by noted activist Yoshiaki Murakami to build up a big stake. Eventually, they owned something like 24%. In the meantime, however, in 2013 the company split its shares 100 for 1.

In June of 2014, Accordia announced it would go with an “asset light” strategy, spinning off its golf courses into a business trust to be listed in Singapore, IPOing that business trust which we know as Accordia Golf Trust (AGT SP), and then using the proceeds to launch a Tender Offer for 30% of its own shares at a premium – ¥1400/share.

It is not clear whether the entire defense and subsequent buyout had been arranged by Accordia, whether Murakami-san and his associates executed a strategy some might call greenmail which turned out OK for him, or whether devout and earnest activism led to a profound change of heart at Accordia’s top level of management, which coincidentally led to the best possible exit/outcome for Murakami-san and his associates. The pro-ration rate on the tender was, of course, quite high because there was a significant deemed dividend withholding tax – something to which corporate holders (and the Murakami entities are, I believe wholly non-coincidentally, corporate entities) are effectively immune. 

In 2016, Korea-based private equity firm MBK launched a Tender Offer to buy out the asset-light Accordia and so ended up owning the golf course operator and 28.5% of Accordia Golf Trust and 49% of the Accordia Golf Trust-Manager.

Over time, various parties owned significant single-digit percentages of the AGT entity in hopes that Accordia Golf would be by shortly to buy out the entity. In November 2019, Accordia Golf’s owner approached Accordia Golf Trust (AGT SP) with a proposal to buy out the golf courses (which would mean leaving AGT as a cash entity, and subject to windup). This was seen as long overdue, though the price was slightly on the low side, and would mean the reunification of golf course with golf course manager. Then we waited. 

In June 2020, AGT and its Trust Manager announced they had reached a deal with Accordia Golf and its manager to do so at a price of ¥61.8bn + ¥1.2bn owed back to unitholders. Then-largest non-affiliated unitholder Hibiki Path Advisors objected, suggesting a price of S$0.821 was more appropriate (after providing arguments in a press release. This objection was noted and repeated by several other investors (some of whom had even higher publicly-stated target prices), many of whom said they would not tender at the price proposed.

My opinion had been that, the offer might have been a trifle light, and getting the April-October dividend would have been completely reasonable so the market price was low, and low on a reward/risk assessment of likely outcomes. I did not expect a bump other than something in the S$0.022-0.25 range for and April-October distribution.

The objection culminated in a requisition to the Board of the Trustee Manager for an EGM, as discussed in Accordia Golf Trust Deal Gets More Complicated. Units which had been trading in the S$0.67-68 range fell to S$0.65, likely on fear that opposition would lead to impasse and a failed deal, and then trading was halted this past week pending an update.

The NEW News

The new news is that the Board of the manager of AGT – Accordia Golf Trust Management Pte Ltd – and the Buyer Accordia Golf have agreed on a new deal which lifts the ¥61.8bn price by ¥3.4bn which is roughly S$0.04/unit or a lift of approximately 5.5% against the assets bid price. 

Hibiki Path Advisors with 7.6% of the units out has (as has Santa Lucia Asset Management) to withddraw the Requisition Notice for an EGM, and to vote for the Proposed Asset Disposal and all other/subsequent shareholder meetings which lead to the transaction being successful. 

This leads to an actual payable uplift of S$0.03916 per unit (using a rate of SGDJPY 77.15) if one assumes that none of the 5% of the asset purchase price withheld would be held back in the time following the effective date of the transfer, lifting the “Expected Payout” on such terms (including the after-tax and shareholder split of the ¥1.2bn special reserve to be distributed) to be lifted from ~S$0.7182/share to ~S$0.7571/share. 

The deal is still conditional on a vote, but now that the two most vocal opponents have been placated, this looks likely to go through. When AGT SP commences trading, units will likely start trading with a substantially lower discount-to-worst and if not, they will be even more of a buy than they were when they were halted.

As always there is more below the fold.

Past Insights on Accordia Golf and Singapore M&A

2019 Travis Lundy  Quiddity Singapore M&A Guide 2019 
29 Nov 2019 Nicolas Van Broekhoven  Accordia Golf Trust: Privatization Likely at Min S$0.76/unit Leaves 13% Upside 
29 Jun 2020 Travis Lundy  Accordia Golf Trust Buyout… A Gimme But… 
5 Jul 2020 Travis Lundy  Major Accordia Golf Trust Shareholder Has Issues With Price & Process 
19 Jul 2020 Travis Lundy  Accordia Golf Responds to Hibiki Path 
28 Jul 2020 Travis Lundy  Accordia Golf Trust Deal Gets More Complicated 

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