By Anshuman Daga and Aradhana Aravindan
SINGAPORE (Reuters) - Malaysia's Axiata Group Bhd <AXIA.KL>, the largest shareholder in Singapore-listed M1 Ltd <MONE.SI>, is likely to reject an offer led by conglomerate Keppel Corp <KPLM.SI> to acquire M1, a source with direct knowledge of the matter said on Thursday.
Keppel and Singapore Press Holdings Ltd (SPH) <SPRM.SI> are offering to buy the remaining shares in M1, Singapore's smallest mobile network operator, that they do not already own, in a deal worth up to about S$1.27 billion (£707.8 million).
The two firms are seeking to gain majority control of M1 through the deal.
Axiata views the S$2.06 per share offer as "opportunistic" and "inadequate", said the source, who did not want to be named as Axiata has not issued a response to the offer.
Axiata, which has a 28.3 percent stake in M1, is also in talks to team up with private equity firms and other companies as it considers options to launch its own offer for a bigger stake in M1, the source said.
Keppel Corp, through its unit Keppel Telecommunications & Transportation Ltd (Keppel T&T) <KTEL.SI>, media firm SPH and their related parties have a total stake of 33.27 percent in M1.
Axiata declined immediate comment on the Reuters story.
In 2017, the three major shareholders conducted a strategic review of their M1 stakes, but sources said it was dropped due to a lower-than-expected offer from external parties.
KGI Securities analyst Joel Ng said the Keppel-SPH offer appears aimed at minority shareholders, but he added it was possible they would raise the offer price to get Axiata's support.
Keppel and SPH are offering a 26 percent premium to M1's last closing share price of S$1.63 on Friday.
"Through majority control, we would, together with SPH, be better able to support M1's management to drive changes and create greater value in the company," Loh Chin Hua, CEO of Keppel Corp, said in a statement.
The offer is subject to conditions, including approval from Singapore's Info-communications Media Development Authority on or before March 27, 2019.
Competition in mobile telecommunications is heating up in Singapore, with Australia's TPG Telecom <TPM.AX> planning to launch services after winning a licence to become the city-state's fourth telecom operator. M1 is considered to be the most vulnerable to new competition, according to analysts.
Separately, Keppel said it was seeking to privatise Keppel T&T for S$1.91 per share, a 40 percent premium to the stock's last closing price.
It already owns a 79.22 stake in Keppel T&T, which provides logistics and data centre services.
Trading in shares of Keppel, Keppel T&T, SPH and M1 was halted ahead of the announcements.
DBS Bank is the financial adviser to Keppel, while Credit Suisse (Singapore) is advising SPH.
(Editing by Sunil Nair and Darren Schuettler)