Optus Directors Agreeable To SingTel’s Cash-Share Offer

Shareholders of Australia’s Cable & Wireless Optus will, by the end of this week, receive a bidder’s statement and offer package from SingTel Australia Investment Ltd., the subsidiary of Mainboard-listed Singapore Telecommunications Ltd.

They will have until July 3, 2001 to say yes to SingTel’s cash-and-share offer that Optus’ independent directors are recommending they accept in the Singapore telco’s bid for Australia’s second-largest operator. The offer opens May 23, 2001.

Advised by Grant Samuel & Associates, the Australian investment bank that considers SingTel’s offer reasonable (although not fair), Optus directors are themselves intending to choose the cash-and-share option, which works out to be worth A$2.25 (US$1.19) in cash and 0.8 SingTel shares for every Optus share to present, a combined value of A$3.72 (US$1.96) based on May 18, 2001 exchange rates and the closing price of SingTel shares of S$1.75 (US$0.98).

SingTel would have to fork out S$7.1 billion (US$3.9 billion) if it manages to buy out the 52.5 percent stake that Cable & Wireless currently has in Optus. However, if it manages to fully acquire the Australian telco (assuming that all minority shareholders of Optus accept the cash-and-share offer) it will have to shell out S$12.8 billion (US$7.1 billion).

Assuming full acquisition of Optus, the enlarged SingTel would have had, on a pro-forma basis, total assets of S$29.2 billion (US$16.1 billion) as at March 31, 2001, operating revenue of S$9.4 billion (US$5.2 billion) and EBITDA of S$4.2 billion (US$2.3 billion) for the year ended March 21, 2001, the Singapore telco announced in a statement.

It will also have a total subscriber base of nearly 11 million across five markets in the Asia Pacific region, supported by an extensive and advanced data communications network, comprising submarine, satellite and domestic backhaul networks covering key markets in the region and providing global connectivity.

According to the statement, SingTel intends to manage Optus’ daily operations as a standalone business “for the foreseeable future.” It also plans to ensure sufficient investment in the rollout of the Optus 3G network, and “examine the advantages of combining international networks and services, including satellite and submarine cable assets, of SingTel and Optus.”

SingTel chairman Koh Boon Hwee said there exists a “compelling strategic fit” in SingTel’s and Optus’ business models and product focus. “Optus focuses on growth platforms that are aligned with those of SingTel, specifically in mobile and data communications,” he said.

In addition the combination of diverse revenue streams and a strong presence in the two developed markets in which the telcos operate is expected to “assist SingTel in maintaining greater stability in earnings and cash flow, without sacrificing substantial growth opportunities in developing markets,” he added.

SingTel has already received in-principle approval from the Singapore Exchange and the Singapore Infocomm Development Authority (IDA), and is currently applying for a listing on the Australian Stock Exchange.

It had also lodged an application with Australia’s Foreign Investment Review Board last week, and has held related discussions with various Australian government departments and agencies. According to the SingTel statement, the discussions “have progressed well and SingTel does not believe that there are any issues that cannot be resolved.”

SingTel’s bidder statement and Optus’ target statement are available here.

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