StarHub May Have to Raise Equity to Finance Potential M1 Deal

Dow Jones09-24 17:23

0923 GMT - StarHub may have to raise equity to finance a potential deal to buy peer M1, says Macquarie Capital's Zhiwei Foo in a note. StarHub confirmed it is in talks with M1 owner Keppel Ltd. to acquire the telecommunications unit. Foo estimates that StarHub could need to issue stock equivalent to 12% of its existing shares to ensure the deal is earnings-per-share-accretive within certain tested sensitivities, assuming that M1's enterprise value is 1.16 billion Singapore dollars and that M1 and StarHub have synergies worth around S$100 million. He reckons StarHub has to either negotiate a lower price or drive higher synergies with M1 to make the deal work. Macquarie continues to prefer Singtel in the telecommunications sector, given the uncertainty around a potential StarHub-M1 deal.

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