Channel NewsAsia

Takeovers and buyouts sweeping through S'pore market

Singapore-listed Frasers Centrepoint is bidding to buy Australian developer Australand for about S$3 billion -- amid growing mergers and acquisitions activity involving Singapore firms. Channel NewsAsia looks at what is driving this trend.

SINGAPORE: From mall operator CapitaMalls Asia to bulk container firm Goodpack -- a flurry of takeovers and buyouts is sweeping through the Singapore market.

Market watchers said the trend started in 2013 but has since picked up pace.

Chang Tou Chen, managing director and head of banking for Southeast Asia at HSBC, said: "Some of that is driven by the appetite for consolidation, some of that is driven by opportunity -- the opportunity to acquire when someone is selling, and a lot of it is driven by the availability of funding.

"The markets are very liquid -- both in the capital markets as well as in the banking market."

According to Thomson Reuters data, Singapore merger and acquisitions (M&A) announced in the first quarter of this year hit US$12.4 billion, a four-fold increase from the same period a year ago.

Amid slowing earnings growth, larger companies with excess cash are looking at mergers and acquisitions as one way to boost earnings. However, they are facing increasing competition from other investors like private equity funds.

Last week, private equity firm KKR launched a takeover bid for Singapore-listed Goodpack, and earlier this year, investment firm Temasek raised its stake in agri-commodities trader Olam.

Experts said companies in certain industries are more likely to be M&A targets.

Khoo Boo Han, a partner at Harry Elias Partnership, said: "Businesses in food -- be it restaurants, or (agri-business) companies like Olam. Perhaps going forward, with the change in the transport sector in Singapore -- perhaps the transport sector could see some M&A activity as well."

But it is not just about chasing growth -- there is another perhaps more pressing reason for the increased M&A activity. More developers are opting to take their companies private as the real estate sector reels from property cooling.

Robson Lee, a partner at ShookLin & Bok, said: "These property developers, they are suffering from poor earnings, poor market sentiment, buyers are adopting a wait-and-see attitude. It affects consecutive quarters of profit and loss so it makes sense for them to consider de-listing.

"Otherwise, if you have unsold units within two years of completion, you got to start paying the government taxes, and that's something which will affect their (earnings)."

Recent privatisation targets include Singapore Land and Hotel Properties Limited. Observers said property firms like Wheelock Properties, Ho Bee, and Tuan Sing could be next.

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