Axiata Group Berhad (“Axiata” or “the Group”) via its wholly-owned subsidiary, Axiata Investments (Singapore) Limited has accepted the voluntary conditional general offer (the “Offer”) by Konnectivity Pte. Ltd, for the Group’s entire stake in M1 Limited (“M1” or the “Company”) for a total cash consideration of approximately RM1.65 billion at the offer premium price of SGD2.06 based on terms stipulated in the Offer documents dated 7 January 2019. The Group will effectively divest its 28.7 percent stake in M1 and exit its investment in Singapore with an estimated gain of RM126.5 million from this deal.
Axiata’s investment in M1 commenced in 2005 and the Company had steadily contributed to the Group’s growth over the years with dividends amounting to RM1.1 billion in the last 10 years. Over that period, it had generated very healthy dividend yields of approximately seven percent over the years.
Given the financial returns as well as its strategic benefits, Axiata has expressed its satisfaction with its M1 investment. The Group also believes in the long-term future of the company despite the short-term industry challenges with the new entrant into the market. Axiata has been consistent in its view that the share price over the last year does not reflect the intrinsic value of the company’s long-term future.
Nevertheless, Axiata has made the decision to accept the Offer due to the need for capital reallocation and new priorities in line with its vision to be the Next Generation Digital Champion by 2022 and the investments required to achieve that. The Group also prefers not to be a minority investor in a potentially privatised company, making the investment illiquid.
Over the last many years, all of Axiata’s operating companies (“OpCos”) in the region have outperformed the market, in terms of revenue market share; some having done so significantly. The Group’s OpCos are in the top two largest mobile company positions in their respective markets, with many of them being best performing companies in most financial metrics.
As such and given the achievements in their markets, continued investments will be required to capitalise on the current momentum. This is in addition to supporting the transformation of all of Axiata’s mobile-centric OpCos into digital converged companies over the next few years, while at the same time, continuing to provide moderate dividends to its shareholders.
These investments include the modernisation of the Group’s IT and network infrastructure, digitisation of its operations across all functions and investments into new growth areas especially in Home and Enterprise segments, and to a smaller extent, its digital businesses.
Axiata also expects to participate in industry consolidation if opportunities arise, and possible acquisitions in new growth areas over the mid- and long-term in some of its footprint countries.
Commentary
Tan Sri Jamaludin Ibrahim, President & Group Chief Executive Officer of Axiata said, “It is actually not an easy decision for us. We like our investment in M1 and believe in its long-term future. At the same time, we need to undertake a major reprioritisation and make better use of our capital to chart a new chapter for the Group in line with our new vision whilst also further enhancing our shareholders’ value”.
“I thank all our fellow shareholders, partners, management and staff of M1 for contributing to the success of the company and for all the collaborations with Axiata over a decade.”
“I also wish Keppel Corporation Limited and Singapore Press Holdings Limited the best of luck in the new phase of growth and the new chapter for M1”.