Singapore Airlines (SIA) Friday announced it plans to buy all the shares of Tiger Airways that it does not already own, with the aim of delisting and privatising the latter, in a deal that values the budget carrier at about S$1.02 billion ($725.46 million).
SIA already owns 55.8 per cent of of the low-cost-carrier, and said it would offer S$0.41 per Tiger Airways share in cash, including an option to subscribe for SIA shares at S$11.10 per share.
“The offer provides Tiger Airways shareholders an opportunity to realise their investment in Tiger Airways at a compelling premium,” SIA said in a statement. It also added that the offer price represented a premium of 32 per cent, 35 per cent, and 42 per cent respectively over the last traded price, the one-month and 3-month volume weighted average prices (VWAP) of Tiger Airways shares, preceding the offer.
SIA also owns another budget carrier that operates under the Scoot brand.
In an email to his staff this morning, Singapore Airlines chief executive Goh Choon Phong said: “We currently have 55.8 per cent ownership of Tiger, having lifted our holding to a majority stake last year. Since then, we have seen Tiger improve its financial position. This is in large part due to Tiger’s own restructuring initiatives. However, Tiger also benefits from being part of the larger SIA Group, as an important element of our portfolio strategy in which we have investments in both the full-service and low-cost sides of the business.
Our investment in Tiger provides the SIA Group an additional engine of growth in an expanding segment of the air travel market, with opportunities for enhanced synergies with other airlines in the Group. This ultimately strengthens the SIA Group as it enables us to tap into market segments that would not otherwise be available to us, providing new revenue- and profit-generation opportunities.”
Goh Choon Phong’ email to his employees also said that SIA was of the belief that Tiger’s prospects to grow independently were limited in the highly competitive LCC (low-cost-carriers) landscape in Southeast Asia.
“The early benefits to Tiger from being part of the SIA Group have already been demonstrated. Feed that Tiger gets from Scoot, and the feed that Tiger provides to Scoot, is important for the long-term success of both carriers, and for the all-important development of the Singapore hub. We believe that full integration with the SIA Group represents the best option to strengthen Tiger’s future growth prospects by allowing for more commercial and network integration, and operational and backroom synergies. This is positive for the staff of all the airlines in the SIA Group, including those at Scoot and Tiger,” his email communication added. (Read SIA chief executive’s email to his staff [here] )
Trading in shares of Tiger Airways was halted ahead of the announcement. The shares closed at S$0.31 on Thursday, while Singapore Airlines closed at S$11.15.
SIA also said that its existing low cost carrier Scoot,will continue to operate in parallel with Tiger, ‘while harnessing the full extent of synergies from much deeper co-operative links’.
In a separate email this morning, Scoot Chairman Ng Chin Hwee providing assurances to his staff, said: “We believe our offer to Tiger shareholders is compelling and hope that it will be considered favourably. We also believe that Tiger’s prospects to grow independently are limited in the highly competitive LCC landscape in Southeast Asia. The early benefits to Tiger from being part of the SIA Group have already been demonstrated. Feed that Tiger gets from Scoot, and the feed that Tiger provides to Scoot, is important for the long-term success of both carriers, and for the all-important development of the Singapore hub.” (Read Scoot Chairman Ng Chin Hwee’s email to his employees [here] )