TIGER AIRWAYS: BUYOUT OFFER FROM

SINGAPORE INTERNATIONAL AIRLINES

Presented By :
VIVEK KUMAR
M1617
Tiger Airways: Buyout Offer from Singapore International Airlines
17-03-2018
(Merger & Acquisition)
Tigerair
• Tigerair first started operations in2004.
• It underwent an initial public offering (IPO) in January 2010, at an offer
price of SG$1.502 per share. When Tigerair was first listed, SIA had a
minority share in the company, and limited influence.
• In late 2014, SIA increased its stake to approximately 55.8 per cent.
• Unlike Malaysia’s AirAsia and Indonesia’s Lion Air, which operated out of
huge domestic markets that could cushion the impact of overcapacity,
Tigerair did not have a similar advantage.
• This lack had translated into large losses in the past four financial years:
losses of $104 million in 2012, $45 million in 2013, $223 million in
2014,and $264 million in 2015.

Tiger Airways: Buyout Offer from Singapore International

17-03-2018
Airlines (Merger & Acquisition)
SIA`S INITIAL OFFER
• On Nov. 6, 2015, SIA launched a takeover for Tigerair at $0.41 in cash
per share, a premium of 32% over Tigerair`s closing price of $0.31 last
day.
• Tigerair`s shareholder were given the option to subscribe for SIA
shares at $11.1043/ share—a 0.4% discount.
• SIA`s declared the intention to delist and privatize Tigerair.
• The offer, which would be funded through SIA`s internal cash
resources, valued Tigerair at $1.02 billion.

Tiger Airways: Buyout Offer from Singapore International

17-03-2018
Airlines (Merger & Acquisition)
SIA`S REVISED OFFER
• Till Dec. 28,2015, SIA had only managed to secure 74.5% of Tigerair,
SIA extended its offer to Jan. 8, 2016.
• On Jan. 4, 2016 SIA had 77.48% of Tigerair shares.
• The offer was increased to $0.45 per share, deadline extended to Jan.
22, 2016. This offer was a 45% of premium to Tigerair`s closing price
of $0.31 on the day before the takeover bid was announced.
• Total valued the budget airlines at approximately $1.125 billion.

Tiger Airways: Buyout Offer from Singapore International

17-03-2018
Airlines (Merger & Acquisition)
THE OFFER BECOMES UNCONDITIONAL
• As of Jan. 8, 2016,SIA had acquired 79.22% of the shares of Tigerair.
• On Jan. 11, 2016, SIA announced a further extension of the deadline
to Feb. 5, 2016, and changed the offer from conditional to
unconditional.

Tiger Airways: Buyout Offer from Singapore International

17-03-2018
Airlines (Merger & Acquisition)
Compute the weighted avg. cost of capital
for Tigerair
• Cost of Debt. = 2.51% (Exhibit 3)
• Cost of Equity = 2.38% + 0.68 * 6.03% = 6.4804% = 6.48%
• Value of Equity = $2510 * 10^6 * 0.45 = 1129.5 * 10^6
• Value of Debt. = $307 * 10^6
• Total Value = 1436.5 * 10^6

WACC = 2.51 (307/1436.5) + 6.48 (1129.5/1436.5) = 0.5364 + 5.0951

= 5.6315 %

Tiger Airways: Buyout Offer from Singapore International

17-03-2018
Airlines (Merger & Acquisition)
Perform a DCF valuation 2010-2015
DCF = ((28254/1.0563) + (39898/1.0563^2) + (-104337/1.0563^3) +
(-45395/1.0563^4) + (-222991/1.0563^5) +
(-264233/1.0563^6))

DCF =

Case Study
Tiger Airways: Buyout Offer from Singapore International
17-03-2018
Airlines (Merger & Acquisition)
Apply the Dividend discount model
• Dividend discount model (DDM) is a stock valuation tool in which the
intrinsic value of a stock is estimated by discounting dividends per
share expected in future.
• Discount model is based on the two basic principles of finance: first,
intrinsic value of an investment depends on the future net cash flows
it generates; and second, a dollar received today is better than a
dollar received after one year (i.e. the concept of time value of
money).

Tiger Airways: Buyout Offer from Singapore International

17-03-2018
Airlines (Merger & Acquisition)
• Intrinsic Value = (D1/(r-g))
Where,
D1 is dividend per share expected to received at the end of the
1st year. (D1 = D * (1+g)).
r is the required rate of return (cost of equity)
g is the expected dividend growth rate

Tiger Airways: Buyout Offer from Singapore International

17-03-2018
Airlines (Merger & Acquisition)
.

Tiger Airways: Buyout Offer from Singapore International

17-03-2018
Airlines (Merger & Acquisition)