SCMP jumps on Kerry Media's HK$2.36b mandatory offer

PUBLISHED : Friday, 21 December, 2007, 12:00am
UPDATED : Friday, 21 December, 2007, 12:00am

Shares in SCMP Group, which publishes the South China Morning Post, surged 8.8 per cent after resuming trading yesterday on news that controlling shareholder Kerry Media will pay up to HK$2.36 billion for the 55 per cent stake in public hands.

The shares closed at HK$2.72, up from HK$2.50 last Thursday, when trading was suspended pending an announcement on the mandatory offer. Turnover was 37.24 million shares worth HK$100.89 million.

Yesterday's close was 24.2 per cent above the year-low of HK$2.19 recorded on November 28.

Kerry will offer HK$2.75 per share to buy all the shares it does not own, which works out to about 860 million shares or 55 per cent of the issued capital. Total consideration for the deal is HK$2.36 billion, which Kerry said it would finance through bank borrowing.

JP Morgan is advising Kerry and Platinum Securities is the independent financial adviser to the SCMP's independent shareholders.

Kerry will keep the listing status of SCMP if fewer than 90 per cent of minority shareholders accept the offer within four months after the dispatch of the offer document.

If more than 90 per cent accept the offer, Kerry will exercise the compulsory right set out in the Takeovers Code to acquire the remaining shares and proceed to withdraw the listing of SCMP shares from the stock exchange.

'The offer price is much lower than our estimation and shareholders should not sell the shares before figuring in the possible contribution from a property development in Clearwater Bay,' said a media analyst, who declined to be named.

The analyst also said the offer price suggested that Kerry might not intend to take SCMP private.

'[The deal] should be interpreted as a technical arrangement only as Kerry bought more than 2 per cent within 12 months,' she said.

BNP Paribas said in a research report that the sum-of-the-parts valuation of SCMP was HK$3.59 per share, of which the development at Clearwater Bay carried a book value of 25 HK cents per share.

Citi set the target price at HK$2.60 for the stock, based on 16 times the publisher's estimated earnings next year.

Kerry, together with another concerted party, increased its stake in SCMP last week by acquiring 50 million SCMP shares or 3.2 per cent at HK$2.39 per share.

The purchase increased Kerry's stake in SCMP to 44.8 per cent.

As Kerry has accumulated more than 2 per cent of SCMP shares in the past 12 months, up from 39.73 per cent stake a year earlier, it is required to make a mandatory offer for all the issued shares of the publishing company based on rules under the Takeovers Code.