Under the scheme, BST would divest STM to STM-Trust for RM6bil to be satisfied by an issue of 4.43 billion trust units issued at S$0.50 each or RM1.24 and about RM527.4mil would be settled via the issuance by STM-Trust of a promissory note or bill of exchange in favour of BST.
The corporate exercise would also see STM-Trust issuing up to 460 million new units in conjunction with the initial public offer (IPO) and the pricing would be determined via book building.
BST will also make an offer for sale of up to 540 million trust units at a price to be determined via the same book building process.
In all, a total of one billion STM-Trust units would be made available to institutional, corporate and retail investors in conjunction with the IPO exercise which would represent about 20.46% of the total enlarged outstanding units of 4.89 billion.
BST expected that this proposal would further unlock shareholder value in STM by accessing a potentially larger pool of investors of non-syariah compliant stocks as well as by adopting a corporate structure that facilitates more effective capital management.
The STM-Trust would be mandated to only invest in gaming type businesses and investments. It would also adopt a policy to distribute 100% of its surplus operating cash flow annually.
Following the successful completion of the scheme, BST would have a 79.54% interest in STM-Trust which would own 100% of STM.
Accordingly, STM-Trust would be managed by a trustee-manager, a wholly-owned subsidiary of BST under the proposed name, Sports Toto Malaysia Management Pte Ltd.
STM-Trust is expected to debut on the SGX by year-end.
By way of illustration, the proposed offer for sale could raise gross proceeds of up to RM667.4mil and the proposed public issue potentially raise gross proceeds of up to RM568.5mill based on an assumed offer price of S$0.50 per STM-Trust unit.
BST CEO Datuk Robin Tan Yeong Ching said the scheme was another example of the board's initiative to further unlock value for shareholders.
“The board is of the opinion that shareholders will benefit in terms of better valuation in the long term.
“The STM-Trust will be focused purely on gaming activities where it can leverage on its core expertise and experience.
This singular objective should enhance transparency for investment managers and research analysts to track the performance of the business” he said in a statement yesterday.
He added that shareholders could also expect to receive special cash dividends from net proceeds to be raised from the offer for sale in conjunction with the IPO.
“The board may consider distributing the majority or all of the units to shareholders of BST as and when it is able to do so legally so that shareholders can benefit directly from the distributions and growth of STM-Trust” he said.
Tan expected that STM-Trust's market capitalisation could be quite substantial and hoped that it would be one of the larger business trusts on the SGX with more than 20% (the minimum spread is 12%) of the units (one billion units) in the hands of the public.
“We hope that STM-Trust will be well received on the SGX given its attractive fundamentals, size and liquidity spread” Tan pointed out.
BST explained that a business trust, a relatively new investment vehicle is akin to a REIT (a trust for real estates) where its caters for other types of businesses such as shipping, ports, telecommunications amongst others.
Upon completion of the proposals, the earnings contribution from STM to BST will reduce by approximately 20.46%.