SIA declares offer for Tigerair unconditional

SINGAPORE — Singapore Airlines (SIA) today (Jan 11) made its takeover bid for Tiger Airways unconditional, making it certain that shareholders of the budget carrier who have already accepted the offer will be paid the final price of S$0.45 per share within 10 days.

SIA also extended the closing date for the offer for the third time to Feb 5. The deal, launched in November, had previously been extended from the original deadline of Dec 28 to Jan 8, and later to Jan 22. SIA’s offer was previously conditional upon the flag carrier and its concert parties owning more than 90 per cent of Tigerair by the close of the offer.

“This signals the final push by SIA to mop up as much as it is able to in the final stage of the offer. Indeed, the shareholders who bought Tiger shares during the initial public offering (IPO) are taking a hit but then had SIA made an offer in the second quarter of last year, the offer price would have been much lower given the poor performance of Tiger Airways,” said Mr Ellis Taylor, Asia Finance Editor at Flightglobal. 

Tigerair shareholders also have the option to subscribe for SIA shares at S$11.1043 apiece.

SIA, which currently controls 57.05 per cent of Tigerair, garnered acceptances that increased its holding to 79.22 per cent as of Jan 8, it said in a stock exchange filing today. 

SIA is required to garner 90 per cent of Tigerair’s shares to delist the low-cost carrier. “If it fails to delist Tiger Airways, the cost impact of maintaining it as a listed company will be between S$1 million to S$2 million a year, which is not much. The process of integrating the budget carrier into the group will, however, not be seamless,” Mr Taylor added.   

SIA announced its takeover bid on November 6 last year, offering Tigerair shareholders an initial offer price of S$0.41 per share. The offer was raised by nearly 10 per cent to S$0.45 a share on Jan 4, following an appeal by the Securities Investors Association Singapore (SIAS), on behalf of Tigerair’s long-term minority investors.

Some Tigerair shareholders have highlighted that the initial price SIA offered was around 70 per cent below Tigerair’s IPO price of S$1.50 in 2010. 

The final offer price cannot be raised further according to takeover regulations, SIA said today.

SIAS President & CEO David Gerald said today that minority shareholders holding out for a better offer now need to weigh the risk of potentially owning shares of a delisted company, or holding on to SGX-listed Tigerair shares - with SIA as majority shareholder - with lower liquidity and the share price subject to market conditions.

“The semantics, conditions and the offer price has obviously changed a few times in recent weeks. The strategic importance of the proposed transaction remains. The SIA Group needs to fully integrate Tigerair into its portfolio. One way or the other this will happen and I don’t see much of a threat that (SIA not achieving 90 per cent of Tigerair shares) could derail the integration,” said Mr Brendan Sobie, chief analyst at aviation consultancy CAPA. 

Several analysts and industry experts have so far said that SIA’s offer is fair considering Tigerair’s performance, current market conditions and the aviation industry’s challenge.

Tiger shares gained 1.1 per cent to close at S$0.455 today in a volatile day of trading where the Singapore Straits Times Index fell 1.5 per cent. SIA shares lost 0.45 per cent to close at S$10.96.

The final offer represents a price premium of 45 per cent over the last traded price of S$0.31 before the offer was announced, SIA said in its statement today. It also represents a price premium of 49 per cent over the one-month volume weighted average price of S$0.303 and a 56 per cent premium over the three-month VWAP of S$0.288 of Tigerair shares preceding the announcement of the offer, it added. In addition, the new offer price exceeds the highest closing price since 25 October 2013, on a rights-adjusted basis, SIA said.