Media Prima will only proceed if it has 51% controlling stake in NSTP

PETALING JAYA: It was quite unlike the spate of takeover announcements in recent months which had sent share prices of the targets surging. Yesterday, investors of The New Straits Times Press (M) Bhd (NSTP) voted with their feet, knocking some 15% off the counter on Media Prima Bhd’s plan to take over the country’s oldest newspaper group.

NSTP shares, which were suspended from trading on Friday, fell 37 sen to RM2.09, making it the day’s second biggest loser, while Media Prima shares gained 5 sen to RM1.82.

The proposed conditional general offer by Media Prima of its 43% associate NSTP was revealed last Friday by Media Prima chairman Datuk Johan Jaaffar and group managing director Datuk Amrin Awaluddin.

The takeover involves a one-for-one share swap with one free Media Prima warrant for every five NSTP shares, which effectively values NSTP at RM2.10 per share.

From the onset, the valuation appears unattractive given its steep discount from two perspectives – NSTP’s pre-announcement market price of RM2.46 last Thursday and book value of RM4.56 per share.

“It’s a marginal deal for NSTP shareholders,” said Andrew Lee, research head of Maybank Investment Bank. “It would lead to a destruction in value for the current shareholders of NSTP,” said ECM Libra Research.

But proponents of the deal pointed out that NSTP’s share price had long been languishing below RM1.50 (year to date, it’s been trading at an average RM1.35).

“Now with the takeover, it is valued at RM2 per share. Surely that’s a good thing,” said one observer.

Amrin had pointed out that Media Prima’s offer price was based on “fundamentals of the business, historical average price of NSTP in the past one year prior to such speculative spur in share price.”

“We believe the offer is fair ... it does not represent an exit offer to the shareholders of NSTP but the pooling of strengths between two leading media groups.”

Similarly, AmResearch analyst Izz Al-Din Maslan opined that the valuation of price-to-book of 0.4 times was fair as it was NSTP’s five-year average price-to-book ratio: “Admittedly, the effective valuation of RM2.10 per share is unattractive (compared with RM2.46). But we believe the share price has moved ahead of its fundamentals on the back of the takeover rumour.”

He has a positive take on the exercise. “It (the deal) would allow the enlarged entity to reap synergies and achieve cost savings through merger of back office functions. Importantly, the enlarged Media Prima will be able to tap into NSTP’s strong cashflow generation to fund its growth objectives.”

Lee pointed out that NSTP shareholders had a chance to participate in a media conglomerate covering five media platforms with greater growth prospects.

“... They gain exposure to a more liquid, larger capitalised and well-followed stock with exposure to media platforms which have higher long-term growth prospects than print media,” he said.

Media Prima will only proceed with the proposed takeover if it receives acceptances that will result in a minimum controlling stake of 51% in NSTP.

For that, all it needs is another 8%, which could come from NSTP’s second largest shareholder, the Employees Provident Fund with a 11% stake. It is widely speculated in the market that the EPF had already given its nod for the deal.

“The main driver here for Media Prima is control rather than consolidation although the threshold for that remains the same (51%). If it gains control with a 51% stake, it ends up having full 100% control of NSTP’s cash flow without having paid for the remaining 49%.

“If it really wanted 100% of the shares or to delist the company, I think it would have paid a little bit more for it,” said an analyst.

Meanwhile, NSTP announced that it has appointed OSK Investment Bank Bhd independent adviser for the deal.