Wednesday, November 25, 2015

SIA Offer for TIGER Air

Whenever I fly budget, I will choose Tiger Air. The main reason being, after trying Jet Star vs Tiger, I find flying with Tiger a more pleasant experience, in terms of service as well as air-craft space and facilities.

Just a few months ago when I was holidaying in Bali and was flying TigerAir when the Bali airport was closed for 6 hours due to volcanic ash threat. 6 hours, it was really exhausting! But a few hours into the waiting, Tiger made an announcement for their passenger to collect complimentary food and water, FOC. I noticed inside the airport, Tiger was the only airline that gave out free food and water to their passengers. And food means rice and meat, not bread or cakes. NICE gestures indeed, right! It won my vote for the best budget airline for SURE! hehe...



So now SIA is making a takeover offering at $0.410 and an option to subscribe SIA share at $11.1043.

Some Minority Shareholders have voiced out that this offer is "not reasonable". The Minority shareholding is 44.2%, btw, it is not really that "MINOR" (this is just an accounting terminology usually used).
What do you think? Is it a good deal?



While on one hand, Tiger is still not showing profits, they are definitely narrowing on the losses (if you take out the one-off "Provision for onerous aircraft leases of $108.6Million!"). See the most recent Oct 2015 results announcement:


I am confident (as SIA is too) that Tiger will be able to show profit in the near future. So there is no better timing to offer a buyout as now. $0.41 offer with an option to purchase SIA share at $11.1043 while SIA share is trading at $10.70 currently. A -ve option to purchase LOL NOT very nice of SIA, indeed. So opportunistic. The offer shows they are not as "high-class" as they brand themselves to be, isn't it. In fact, rather low-ball. BAD PRICE, BAD TIMING. I am sure SIA knows that at 41ct, MOST minority shareholders will be making a LOSS. Plus offering an option to purchase SIA share at not a single cent of discount? How Sincere is that in inviting Tiger shareholders to become SIA shareholders? *Speechless*

Please Note, SIA only holds only 56% of the shareholding in Tiger. If they can't reach 90% share, this deal may not go through. So in this case, the "MINORITY" shareholders here are NOT that minority at all. They hold 44%. So if this is not a good deal, you can choose not to sell. Then SIA may have to make a better offer or status quo or apply to MAS for approval or they may think of exiting Tiger all together, which I don't think they would given the investment they have put into Tiger and the changing competition and growing demand in the region for low-cost carriers.