Australian-listed telecommunications company Tuas’ wholly-owned subsidiary Simba Telecom is acquiring M1 from a wholly-owned subsidiary of Keppel for an enterprise value of $1.43 billion.
According to an Aug 11 bourse filing, the acquisition excludes M1’s information and communications technology (ICT) businesses.
Simba has entered into a binding share purchase agreement with vendors Keppel Konnect and Konnectivity to acquire 100% of M1. Keppel will receive close to $1.0 billion in cash proceeds for its 83.9% effective stake in M1.
StarHub, which has held on-and-off discussions with Keppel over M1, saw its share price drop to $1.18 as at 9.11am, down 3.28%.
Keppel, meanwhile, has a trading halt in place. The pro forma financial impact on Keppel's earnings per share (EPS) if the divestment had completed on Jan 1 is likely to be 9.1 cents compared to the reported EPS of 21.3 cents for 1HFY2025.
However, pro forma net tangible asset per share, which excludes goodwill, will rise from $5.16 as at Dec 31, 2024 to $5.66. Keppel closed at $8.58 on Aug 8.
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Keppel says Simba’s bid is a “compelling all-cash offer at an attractive valuation”, reflecting Keppel’s “successful transformation” of M1 from a traditional telco into a digital-first network operator since its privatisation in 2019.
That said, Keppel estimates an accounting loss of $222 million, computed on a pro forma basis. This assumes the proposed transaction had been effected on June 30. “The actual loss on divestment to Keppel on completion will depend on the consideration, which is subject to post-completion adjustments and the carrying value of the assets relating to proposed transaction.”
This includes goodwill of $988 million, which Keppel recorded from acquiring M1 in 2019.
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Still, the transaction “crystallises value” from Keppel’s investment in M1 over the years, says Keppel in an Aug 11 bourse filing. “Taking into account Keppel’s initial investment in M1 in 1994 as one of its founding members, the subsequent privatisation of M1 as well as dividends and divestment proceeds from 1994 to 2025, Keppel is expected to receive cumulative cash of more than $700 million with the proposed transaction.”
As the relative figures from the proposed transaction do not exceed 20% of Keppel’s net asset value, profit before tax and market capitalisation, shareholder approval is not required.
DBS is the financial adviser to Keppel for the proposed transaction.
Funding the acquisition
In the last 12 months to April 30, M1 ex-ICT reported revenues of $806.1 million and ebitda of $195.4 million. The acquisition represents an implied multiple of 7.3 times M1 ex-ICT ebitda for the last 12 months.
The acquisition will be funded by existing cash, as well as by an equity raising of approximately A$416 million ($348 million) by way of an A$366 million non-underwritten institutional placement and share purchase plan (SPP) of up to A$50 million, along with $1.1 billion of fully underwritten acquisition bank debt financing.
New shares under the SPP will be issued at the lower of placement price and 2% discount to the five-day volume-weight average price up to, and including, the closing date of the SPP.
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Tuas expects the acquisition to be “highly” earnings per share-accretive for shareholders from “year 1”.
On completion, Tuas expects its pro-forma debt to ebitda leverage ratio for the last 12 months to be approximately 4.0 times. “The pro-forma group is anticipated to quickly de-lever as synergies are realised and through continued operational discipline,” reads a press release.
Completion remains subject to certain conditions precedent, including approval by Singapore’s Infocomm Media Development Authority (IMDA). Tuas hopes to complete the acquisition “over the next few months”.
Tuas was incorporated in March 2020 as part of the TPG Telecom group of companies. It will report its FY2025 results on Sept 24.
Rationale
Tuas says the transaction is expected to generate “material synergies” due to “significant network and operations convergence” for both the mobile and fixed networks, while increased scale will drive greater operational efficiency.
Tuas executive chairman David Teoh says: “Since entering the Singapore market, Simba has enhanced competition and delivered exceptional value to consumers. The acquisition of M1 marks an exciting new chapter in our growth journey. It will strengthen our market position and enable us to deliver an even more robust network, unlocking the full potential of 5G mobile and 10Gbps broadband for consumers, SMEs, and enterprises alike.”
Teoh adds: “This transaction is a strategic step towards long-term, sustainable growth for Simba and our shareholders, and allows us to provide excellent quality of service to our customers.”
Loh Chin Hua, CEO of Keppel, says the proposed transaction offers a “strategic path to sustainable growth for Singapore’s telco sector”. “M1 and Simba are a highly synergistic combination — together, they can scale more efficiently, optimise infrastructure and accelerate 5G and digital investments, greatly enhancing service quality while contributing to a more resilient, future-ready telco industry.”
