SCMP acquisition talk

SCMP bemused by share spike

Publisher of the Hong Kong daily newspaper at a loss to explain surging stock price, despite admission of acquisition talks.
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SCMP's Hong Kong-traded shares will resume trading today
<div style="text-align: left;"> SCMP's Hong Kong-traded shares will resume trading today </div>

Hong Kong’s stock exchange halted trading in SCMP Group yesterday after its shares soared almost 23% in morning trading.

The company, which publishes the city’s leading English-language newspaper, The South China Morning Post, said later in the day that it was “not aware of any reasons” for the sudden interest in its shares and that there was no inside information that needed to be disclosed.

However, it then went on to say that it is “in negotiation with third parties regarding possible acquisition of a group of media companies in Hong Kong”, noting that the talks were at an early stage and a deal may not materialise.

Such caution was nowhere on display at the stock exchange, where investors drove SCMP shares to a high of HK$2.29 by mid-morning, up more than 30% from Friday’s close of HK$1.75. After some back and forth, the shares were at HK$2.15 by 1pm when trading halted.

More than 3.7 million shares had changed hands by then, compared to an average daily trading volume of around 155,000 during the past month, according to Bloomberg data.

It is not surprising that rumours are circling the SCMP. Its shares are due to be suspended on February 26, the expiry date of put options granted in 2009 to J.P. Morgan, Deutsche Bank and Bank of East Asia, which will return a 14% stake in the company to Kerry, reducing the public float to around 11%.

That may prompt the Kerry group, controlled by Robert Kuok, Malaysia’s richest man, to delist the company or sell it.

The business remains profitable, but only just. For the first half of last year, the latest published figures, the newspaper business booked a net profit of less than $5 million — half as much as it earned during the first six months of 2011 and representing only a fifth of the group’s total profit, most of which was from its property holdings.

The other part of its business is magazine publishing, which was half the size of the newspaper division based on the most recent profit figures.

SCMP shares are set to resume trading this morning.

¬ Haymarket Media Limited. All rights reserved.
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