In this briefing:
1. CapitaLand Ltd – Premium Price for Ascendas-Singbridge
CapitaLand Ltd announced yesterday that it will be acquiring Ascendas-Singbridge (“ASB”) from Temasek Holdings.
The agreed enterprise value for ASB was S$10,907 mil and the equity value of ASB payable to Temasek Holdings was S$6,036 mil.
This is a transaction that makes good strategic sense. CapitaLand and ASB’s businesses, sector and geographical exposures complement each other well. Any tangible benefits from the synergies are likely to be seen over the mid to long term. The increase in AUM and addition of new capital recycling platforms will make CapitaLand more appealing as a real estate fund manager to institutional investors and sovereign wealth funds.
However, the acquisition consideration for ASB is not cheap. CapitaLand is acquiring ASB at a price-to-book ratio of 1.15x. But this is a necessary step that CapitaLand has to take in order to execute its CapitaLand 3.0 strategy.
From an investor’s perspective, concerns on the valuation of the deal, CapitaLand’s worsening credit metrics, and execution of the integration plan are likely to affect CapitaLand’s short-term share price performance. Management needs to demonstrate the ability to extract quantifiable synergistic value from the acquisition in order to justify the premium paid but this can only happen over the longer term.
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