CapitaLand Limited - MANAGEMENT REPLY: Why its independent directors are not considered independent on other Temasek-backed companies' boards?

FRIDAY, 11 DECEMBER 2015 - Capitaland Limited posted robust earnings' growth in the quarter just gone by.

This report is about certain acquisitions, which strangely resulted in net cash inflow for the group.

We also wonder why it paid cash to buy a foreign company, in which liabilities outweigh assets.

Apart from the financial matters, this report is about governance-related affairs at the company.

Investor Central. Asian insights for global investors. We ask the tough questions of Asian companies to which global investors need answers.

Question

1. Which subsidiaries did it acquire in Q3?

According to its cash flow from financing activities, Capitaland recorded a net cash inflow of S$112.6 mln on acquisition of subsidiaries during the quarter.

In other words, the sellers paid S$112.6 mln to Capitaland for buying certain companies from them.

Therefore that makes us wonder which companies did it acquire and how did it end up earning cash from the acquisition(s).

Management replyThe cash flows for "Acquisition of subsidiaries, net of cash acquired" for 3Q 2015 was an inflow of S$112.6 million This arose mainly from the acquisition of the CapitaLand China Development Fund (CCDF) during the quarter. The Group paid US$50.8 million for the remaining 62.5% of net assets in CCDF that it did not already own. With the acquisition, the Group consolidated the assets and liabilities of CCDF, including its cash. The S$112.6 million as presented in the 3Q 2015 results included the cash in acquired subsidiaries, in line with the requirement of financial reporting standards.

Question

2. Why did it pay to acquire net liabilities of BBID Limited?

On October 2, Capitaland bought a 100% stake in BBID Limited from an unrelated party for just S$282.

While it said the price was determined on a willing-buyer willing-seller basis, it revealed the Cayman Islands' incorporated company had net liabilities of S$0.5 mln as on September 30.

Therefore that makes us wonder why it paid S$282 for acquiring net liabilities of S$0.5 mln.

What is it trying to achieve through this acquisition?

And how did they arrive at the very precise price of $282?

Management replyBased on BBID's management accounts as at 30 September 2015, the net liability attributable to BBID is USD322,000 (approximately S$453,700), of which, a large part is owed to CapitaLand. This is part of streamlining the legal entities within the Group and has no impact on the P&L.

(Read the full story to get all 8 questions)

We thank the company for the replies.

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