Keppel Land brings prime hedging chance a week before privatization deadline

Will they succeed or won't they?

The odds are in Keppel Corp's favor one week away from the deadline of its privatization bid for Keppel Land.

According to OCBC, there is a high chance that the privatization bid will succeed especially since the price allows minority shareholders to exit at a share price above the pre-offer 36-month high.

KepCorp's offer of $4.38 per share will be adjusted to $4.60 per share if the level of acceptances brings KepCorp over the compulsory acquisition threshold of 90%.

OCBC noted that KepLand, which has been trading with decent volume in the $4.54 to $4.55 range, offers discerning shareholders an attractive hedging opportunity.

“[This] translates to an implied probability of 73% - 77% that the offerer will cross the threshold. In our judgment, this could be somewhat rich and offers a prime hedging opportunity for those planning to accept the offer. They can divest a portion of their KepLand positions in the market at S$4.54 - S$4.55, effectively paying an opportunity cost of S$0.05 – S$0.06 (only 1.1% to 1.3% of S$4.60) to lock in S$4.60 and hedge out the downside risk of a significantly lower S$4.38 offer price,” stated OCBC.