Much of Asia has faced a relatively moribund mergers and acquisitions
(M&A) scene this year but the picture in Singapore is way better.
M&A deals here have vaulted
to a record US$47.4 billion this year - nearly triple the US$16.8 billion worth
of deals that were sealed last year, said data provider Dealogic.
A big chunk of the action in
Singapore has revolved around the mega takeover of Fraser & Neave
(F&N), which is still being played out, and the buyout of its prized unit
Asia Pacific Breweries (APB) by Dutch giant Heineken.
By Wednesday last week, Singapore
had notched up the largest rise in M&A deals from a year ago compared with
other markets in Asia, excluding Japan, Dealogic data showed.
This includes deals that have
been announced, though not necessarily completed yet, involving both
public-listed and private companies.
In terms of overall deal volume,
Singapore was ranked second only to China.
The busy M&A scene here will
likely spill over into next year, bankers said.
"On the back of F&N,
there is likely to be increased analysis of listed conglomerates, where the
sum-of-the-parts valuation could be less than the market valuation, which may
lead to increased M&A activity," said Alvin Lim, HSBC managing
director and head of advisory for Singapore.
Since the tussle for Tiger Beer
maker APB began, along with the ensuing battle over F&N and its sizeable
property and soft drink businesses, there has been much emphasis on the
break-up value or sum-of-parts value, of F&N.
Shares of F&N have risen
steadily on the belief that the group's break-up value is higher than its
market value, hence there are expectations of a bidding war for those
interested in a slice.
Aside from F&N, there were
other major deals in Singapore this year.
The oil and gas sector saw some
excitement with the $2.9 billion takeover of Norwegian offshore drilling firm
Seadrill's Singapore-based tender rig business by Malaysia's oil and gas firm
SapuraKencana Petroleum.
In July, US firm Stanley Black
and Decker revealed a buyout of Singapore-based industrial fastener maker
Infastech for $850 million.
The M&A space in Singapore
has also been spiced up by a slew of privatisations.
Poor valuations and anaemic
trading volumes led to buyout offers by major shareholders of many firms listed
on the Singapore Exchange (SGX).
Some of the memorable ones
include coal company Sakari Resources, Brand's chicken essence maker Cerebos
Pacific, Hersing Corp and Harry's Holdings.
Lim expects depressed valuations,
particularly in cyclical sectors such as shipping and technology, to drive
consolidation in these industries.
"We believe there will be
consolidation and private-equity interest in these sectors," he said.
As for the food and beverage
sector listed on the SGX, many counters, including some long-snubbed and
illiquid ones, have witnessed a sugar rush led by the F&N effect.
That space may be worth watching
closely.
Said Lim: "Valuations may
have reached a level whereby owners may begin to contemplate selling."
Anita Gabriel
Business & Investment Opportunities
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