M1 Limited (M1), a subsidiary of Keppel Corporation (SGX: BN4), and Keppel DC REIT, through its trustee and subsidiary, have signed agreements for a proposed investment by Keppel DC REIT into M1 Network Private Limited (NetCo).

NetCo is a newly incorporated company, which will own M1’s mobile, fixed and fibre assets (Network Assets).

Through an asset transfer agreement between M1 and NetCo, NetCo will acquire the Network Assets at a cash consideration of approximately S$580 million (US$429.98 million), or the net book value of the Network Assets.

In addition, NetCo has also entered into a 15-year network services agreement (Network Services Agreement) with M1 for the use of the network capacity on, amongst others, the Network Assets by M1 and its mobile virtual network operators.

As part of the Network Services Agreement, M1 will perform the day-to-day operation and maintenance of, as well as the capex works for the Network Assets.

NetCo will fund the acquisition through external financing of up to S$493 million ($365.49 million) and the issuance of S$88.7 million ($65.76 million) of bonds to be subscribed by Keppel DC REIT or its wholly-owned subsidiaries and the issuance of S$1.0 million ($740,000) preference shares to Keppel DC REIT’s subsidiary, KDCR Singapore 2 Pte. Ltd.

In return, Keppel DC REIT will receive S$11.0 million ($8.15 million) (comprising both principal and interest) each year for 15 years. M1 and Keppel DC REIT will have equal representation on the Board of NetCo.

Commenting on the transactions, Manjot Singh Mann CEO of M1, said: “The proposed realisation of value from M1’s Network Assets is part of the Keppel Group’s asset monetisation strategy and asset-light business model under Keppel’s Vision 2030.

“When completed, this will unlock value from M1’s existing network assets, enhance M1’s ability to fund its growth initiatives and accelerate its aspirations as Singapore’s first digital network operator.”

Anthea Lee, CEO of the Manager of Keppel DC REIT, added: “The proposed investment is aligned with our strategy to provide Unitholders with regular and stable distributions.

“The investment will also strengthen our income resilience, allow us to benefit from further diversification in income streams and create a stronger platform for acquisition growth via better access to capital and debt markets.”

The proposed transactions are subject to relevant regulatory approvals and approval by Keppel DC REIT Unitholders and are expected to be completed by end of 2021.