By Joyce Koh and Klaus Wille
Singapore Inc. is stirring, with companies from real estate to engineering becoming bolder in their hunt for acquisitions abroad.
Companies in the city-state announced around $91 billion of overseas deals this year through September, more than double the $41.9 billion of transactions for the same period of 2017, data compiled by Bloomberg show. Temasek Holdings Pte and GIC Pte still loom large, but increasingly others are inking their biggest-ever transactions to put Singapore on the world stage.
The flurry of activity shows a new determination by firms to adopt a more aggressive stance amid an escalating trade war between China — one of Singapore’s closest neighbors — and the U.S. An economy that’s forecast to expand next year at the slowest pace since 2016 is also putting pressure on companies to look further afield for growth.
“We’re certainly seeing a desire among Singapore Inc. companies to globalize,” said David Biller, Citigroup Inc.’s head of Southeast Asia corporate and investment banking. “Many of the next-generation leadership teams in these organizations are helmed by executives with multinational experience and they bring a focus on cross-border growth.”
CapitaLand, Singapore Press
Citigroup is advising Singapore Technologies Engineering Ltd. on a $630 million deal — the company’s biggest — to buy an aircraft engine components group from General Electric Co. CapitaLand Ltd. is in the process of acquiring a portfolio of multifamily properties in the U.S. for $835 million in what is its largest overseas transaction since 2010, while Singapore Press Holdings Ltd., owner of the Straits Times newspaper, last month purchased some student accommodation in the U.K. for S$321 million ($234 million), its biggest foray abroad.
It’s not only the total value of deals that’s increasing. Singapore firms were involved in 468 transactions as buyer of foreign companies this year through September, an increase of 7.8 percent from the same period of 2017. Globally, M&A activity rose 2 percent.
“Achieving organic growth in a relatively small market like Singapore is difficult, and building capabilities and scale will be increasingly important for corporates to stay relevant globally,” said Pankaj Goel, the co-head of Southeast Asia investment banking and capital markets at Credit Suisse Group AG.
China, and the expansion opportunities it presents, is proving a strong lure, according to Oriano Lizza, a sales trader at CMC Markets Plc.
“Many Chinese companies have too much leverage and are selling off assets to strengthen their balance sheet,” Lizza said. “Being familiar with the region, Singapore companies are coming in and many do cut-price offers.”
Firms from Singapore have been involved in 68 acquisitions of Chinese companies so far this year. The volume of transactions jumped from $3.8 billion the same period of 2017 to $19.5 billion, Bloomberg-compiled data show.
Who’s Buying What in China
- Keppel Land: 40% stake in JV with Gemdale to develop site in Nanjing
- GIC: Minority interest in China Lianhe Credit Rating
- Huan Hsin Holdings: S$1 billion deal for Huangshan Zhongtian Weiliang Mining
By far the biggest investment in a Chinese company that involved a Singapore one was the $14 billion capital injection in Jack Ma’s Ant Financial. The financing, announced in June, included a U.S. dollar tranche part-backed by Temasek and GIC.
Temasek’s other major transaction was its 3 billion-euro ($3.5 billion) injection to help Bayer AG finance its planned takeover of U.S. competitor Monsanto Co. GIC was also involved in Blackstone Group LP’s acquisition of a majority stake in Thomson Reuters Corp.’s financial and risk unit.
“The Singapore government has been encouraging companies for years to expand abroad to develop the country’s profile,” said CMC’s Lizza. “GIC and Temasek have been at the forefront of it.”
Temasek spokesman Stephen Forshaw said the group’s portfolio companies were independently managed and “Temasek doesn’t direct their business decisions.”
“Of course, over many years, some of these companies have grown organically into regional and global businesses, and in cases, acquisitions have naturally followed,” he said.
With the driving force behind overseas acquisitions showing no sign of letting up, Singapore Inc. will continue its offshore push, according to JPMorgan Chase & Co.’s head of M&A for Southeast Asia, Tay Ee Ching.
Firms are looking to acquire “new technologies, new sources of growth,” she said. “The trend should continue as they become more experienced in competing for assets abroad.”
© 2018 Bloomberg L.P