May 7, 2021

SPH shares fall 11% in early trading following plan to hive off media business

By ellen

SINGAPORE – Shares of Singapore Press Holdings (SPH) fell sharply when trading resumed on Friday morning (May 7) following the company’s announcement to hive off its loss-making media business.

The stock, which was halted from trading before Thursday’s announcement, tumbled 23 cents or 12.85 per cent to $1.56 shortly after the Singapore market opened, before regaining some ground.

The shares were trading at $1.59 at 10.25am, 20 cents or 11.2 per cent lower, with 50 million shares changing hands.

Before Friday, the stock, which had a market value of $2.1 billion, was up nearly 60 per cent year to date.

Under the plan, all of SPH’s media-related businesses will first be transferred to a wholly owned subsidiary, SPH Media Holdings. SPH will provide the initial resources and funding by capitalising SPH Media with a cash injection of $80 million along with $30 million worth of SPH shares and SPH Reit units, and SPH’s stakes in four of its digital media investments.

SPH Media will later be transferred for a nominal sum to a newly formed company limited by liability (CLG), an entity which does not have share capital or shareholders, but instead has members who act as guarantors of the company’s liabilities.

The CLG will be run on a commercial basis, but all profits made will be reinvested into growing its media business, focusing on its mission. The CLG structure will also allow SPH Media to seek funding from public and private sources.

The Ministry of Communications and Information (MCI) has given its in-principle approval for the shareholding and other relevant restrictions under the Newspaper and Printing Presses Act (NPPA) to be lifted from SPH upon the closing of the proposed restructuring. Among other things, the NPPA restricts shareholders to owning no more than 5 per cent of the company’s shares unless given MCI approval.

The transfer of media assets to the CLG is subject to SPH shareholders’ approval at an extraordinary general meeting, which will be called in early July. Upon shareholders’ approval, the restructuring is set to be completed by October.

The separation, which is part of a strategic review announced earlier, is intended to preserve the integrity of SPH’s media business – which includes The Straits Times – while allowing shareholders of the company to see better values for their shares over time.

On Thursday, the Securities Investors Association (Singapore) said SPH’s upfront capitalisation of $110 million may confound shareholders “especially since they view this segment as having value or still revenue-generating and can turn profitable over time”.

SPH chairman Lee Boon Yang said on Thursday that there is little scope for further cost cuts in the media business without impairing the ability to produce quality journalism.

SPH’s media business is expected to continue posting losses. Group operating revenue has halved in the past five years, largely due to a decline in print advertising and subscription revenue, a challenge faced by media companies globally.