Independent directors of Cable & Wireless Optus will recommend SingTel's AU$17 billion takeover bid go ahead, easing its likely passage.
"On balance, the independent directors recommend acceptance of SingTel's offer," Optus said in its target statement, which included an independent report by Grant Samuel and Associates.
An independent report on the bid commissioned by C&W Optus concluded the bid was "only just" not fair, but reasonable.
SingTel emerged in March as the winner of a drawn out auction for Australia second-ranked telco, offering up to AU$17.2 billion in a complicated bid structure.
"A comparison of Grant Samuel's valuation of Optus - AU$3.85-AU$4.42 per share - and the value attributed to the SingTel offer suggests that the SingTel offer is not fair, but is only just not fair," independent expert Grant Samuel said in its report commissioned by the Optus board.
Optus shares, which were trading near A$U4.00 ahead of the bid, were unchanged at AU$3.55 on Monday. The shares have sagged in recent weeks along with SingTel's share price, which has been hit in part by concerns over the merger.
The offer opens on May 23 and closes at 7 pm Sydney time on July 3. C&W Optus independent directors said the decision whether or not to accept SingTel's offer had been finely balanced.
"You should be aware that the decision to recommend acceptance was made after much deliberation and was at the margin," independent directors Gavin Campbell, John Cloney, Greg Haustorfer, Sean Howard and John Morschel said in a letter to be dispatched to minority shareholders.
SingTel, which released its bidder's statement, said C&W Optus independent directors had opted to receive the cash and share offer, one of three proposals on offer.
"Optus shareholders who accept our offer and receive SingTel shares will have a unique opportunity to participate in a leading Asia-Pacific integrated service provider, with diverse, stable revenue streams and attractive growth prospects," SingTel chief executive Lee Hsien Yang said in a statement.
Optus independent directors said they expected control of Optus to pass to SingTel as Optus's 52.5 percent shareholder, UK telco Cable & Wireless, was a likely seller.
Grant Samuel said it expected Optus shares to trade from about AU$3.00 to AU$3.30 a share if C&W Optus's parent accepted and there was no speculation of a "mop up" bid.
"Acceptance of the SingTel offer is recommended in the absence of a high level of confidence that SingTel would need to make a subsequent bid to mop up any minority shareholdings in Optus," it added.
