The Straits Times / The Business Times News on AsiaPharm

Temasek, GIC now boast a stronger overseas portfolio

Kelvin Wong, Grace Ng, Fiona Chan and Gabriel Chen look at the sectors that kept the investment firms busy looking for

IT HAS been a year of a few misses but mostly hits for Singapore's two biggest investment firms - Temasek Holdings and its companies, and the Government of Singapore Investment Corp (GIC).

For the most part, their efforts to build their portfolio of overseas investments in key sectors such as banking and property have gone without a hitch. The Straits Times looks at the thrills and spills of the acquisitions.

INCREASING STAKES IN CHINA BANKS

BANKS ranked high on Temasek's shopping list but none so highly as those in China. And for good reason: The world's fastest-growing economy is expected to sustain growth in excess of 8 per cent over the next few years, so banking will likely boom as well, especially as the sector will be liberalised for foreign investors next year.

This year Temasek bought stakes in state-owned China Construction Bank (CCB) and privately owned China Minsheng Banking. And having reportedly gained approval for a 5 per cent share in Bank of China, it will have made three straight buys - with two of them in China's Big Four.

Its stakes are also growing. Temasek first bought into CCB in August, spending US$1.47 billion (S$2.5 billion) for 5.1 per cent.

In October, it bought another 3.67 billion shares during the bank's initial public offer at HK$2.35 apiece - a total investment of HK$8.63 billion (S$1.87 billion) or US$1.11 billion.

It is also said to be in talks to invest another US$300 million to bump up its stake in Minsheng to 10 per cent, making it the bank's single-largest shareholder.

Temasek has also continued its steady investment in financial institutions elsewhere in Asia. It bought 25 per cent of Pakistan's NDLC- IFIC Bank in March, a stake lifted to 73 per cent in July through a general offer to minority shareholders.

BUYING UP PROPERTY IN ASIA AND EUROPE

EVERYTHING from hotels in Europe to malls in China was hot property this year. Both Temasek and GIC went heavy on real estate, sinking billions into property located mainly in Asia and Europe.

Retail space was in particularly high demand, with GIC's property arm, GIC Real Estate (GIC RE), picking up Jusco Mall in Malaysia for RM95 million (S$41 million) and a stake in Britain's Bluewater Shopping Centre for £318 million (S$917 million).

Temasek unit CapitaLand focused largely on China malls, acquiring two Beijing malls from Beijing Hualian Group for $345 million and partnering Wal-Mart to invest 3.37 billion yuan (S$708 million) in 15 new malls in China.

It also snapped up a $214 million Zhejiang residential plot as well as a $108.4 million mixed development site and a $362 million office building, both in Beijing.

GIC RE's shopping list was more diverse.

It dabbled in a wide range of properties, including old folks' homes in Britain and Germany, an industrial distribution site in Mexico, student hostels in Britain and Ireland, and the Oakwood Apartments Roppongi Central condominium in Japan.

It was also bullish on the hospitality sector, buying more than 70 big-name hotels from British-based InterContinental Group.

This included Paris' historical InterContinental, which was sold for 315 million euros (S$625.9 million), as well as a stable of 73 Holiday Inn and Crowne Plaza hotels in Britain that GIC RE bought in partnership with Lehman Brothers Real Estate Partners and the Realstar Group for £1 billion.

COUPLE OF MISSED CALLS IN TELECOMS

IT WAS largely a year of missed calls for Temasek's telecommunications subsidiaries, which were thwarted in their acquisition bids in key regional markets.

While there were some hits - such as SingTel's US$118 million purchase of a 45 per cent stake in Bangladesh's No. 3 telco PacificBangladesh Telecom in June - the deals that grabbed the headlines were those that fell short.

SingTel suffered its first setback in June when its bid for a 26 per cent stake in Pakistan Telecommunication - the country's biggest telco - was rejected.

Its offer of US$1.2 billion was less than half the US$2.6 billion bid by Etisalat of the United Arab Emirates. But the more notable failure was Singapore Technologies (ST) Telemedia's scuppered bid to secure an effective stake of 28.6 per cent in Idea Cellular - India's No. 5 mobile operator.

In May last year, ST Telemedia had submitted a US$390 million joint bid with Telekom Malaysia for a 48 per cent stake in Idea.

But the Indian government said the deal would give ST Telemedia's parent Temasek significant stakes in two competing telcos and killed the deal. They cited rules stating that a firm cannot hold stakes of over 10 per cent in more than one cellular service provider.

SingTel, 61 per cent owned by Temasek, already owned 28 per cent of another top Indian telco, Bharti TeleVentures. Stranded without the necessary government approvals, ST Telemedia and Telekom Malaysia allowed the deal to lapse in June.

Temasek itself had one hit when it joined a band of private investors to pump US$3 billion into Reliance Infocomm, India's second-largest telco.

Reliance is the main rival of Bharti TeleVentures, in which SingTel spent US$252 million to raise its stake to 30.8 per cent from 28.2 per cent in May.

But this small coup - in line with SingTel's stated intention to further cement its position in its regional associates - was overshadowed by SingTel's missed opportunity to snap up an additional 10 per cent stake in October.

Instead, Vodafone swiped it from under SingTel's nose for US$1.5 billion. Vodafone has since won Indian government approval to double this stake, prompting market-watchers to wonder if SingTel's thrifty approach has cost it a secure grip on one of its crown jewels.

BOOSTING AIRLINE, MARITIME ASSETS

TEMASEK and its wholly owned port operator PSA International strived to build a portfolio of maritime assets, with an eye on China.

Reports in June said Temasek will invest US$150 million in China's biggest containership operator, Cosco Holdings. Around then, PSA made a billion-dollar splash, taking stakes in two of Hutchison Whampoa's container terminal arms, Hongkong International Terminals (HIT) and Cosco-HIT.

Under the deal, PortCapital, which is backed by PSA, will pay US$925 million in cash for a 20 per cent stake of HIT and 10 per cent of the Cosco-HIT terminal.

Temasek cash also poured into the airline sector. It reportedly won approval in October from the Vietnamese government to buy a 30 per cent stake in the country's No. 2 carrier, Pacific Airlines. A few months earlier, Dahlia Investments, a wholly owned subsidiary of Temasek, formed Great Wall Airlines, a joint venture cargo airline with China Great Wall Industry and Singapore Airlines Cargo.

Meanwhile, in a year marked by record oil prices, Temasek-linked companies Keppel Corp and SembCorp Marine announced new expansion plans. SembMarine subsidiary PPL Shipyard said it is in the process of acquiring Texas-based Sabine Shipyard to expand its drilling rig business in the Gulf of Mexico. Keppel said its subsidiary, Keppel Fels, had received a contract to build a cost-efficient semi-submersible drilling platform for a unit of Ensco International.

MAKING HEADWAY IN PHARMACEUTICALS

THE potential of high margins led Temasek to ink several deals in the health-care industry. In October, it acquired an undisclosed stake in Indian pharmaceutical formulation firm Medreich Group.

Temasek also signed a US$112 million joint venture with Interpharma Asia Pacific and Quintiles in June to acquire, market and distribute pharmaceutical products.

In the same month, Temasek announced its investment in the BioVeda China Fund, a fund aimed at the life sciences sector in China.

Temasek declined to reveal its investment amount but the fund aims to invest at least US$5 million each in three to five firms.

Asia-Pacific's pharmaceutical market, estimated at US$21 billion, offers size and huge potential.

Mainboard-listed AsiaPharm Group, a China-based drug firm in which Temasek has a stake, this year alone signed deals with four international groups, including Switzerland's Sochinaz, to manufacture and distribute drugs in Asia and Europe.

kelvwong@sph.com.sg

graceng@sph.com.sg

fiochan@sph.com.sg

gabrielc@sph.com.sg