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Record year for mergers and acquisitions
Publication Date : 26-11-2012
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."