Shares linked to Jardine Matheson Holdings, Singapore's biggest conglomerate by market value, rallied yesterday after the group said it will delist its next largest unit in a US$5.5 billion (S$7.4 billion) buyout deal to simplify its structure.
Jardine Matheson, whose businesses range from vehicles to hotels, gained as much as 8.4 per cent after it said in a filing before trading opened yesterday that it will acquire shares that it does not already own in Jardine Strategic Holdings for US$33 in cash per share. Shares in the latter jumped as much as 37 per cent, the most on record.
The stock was the top gainer in the MSCI Asia Pacific Index. It closed 19.5 per cent higher at US$32.80 yesterday.
The deal marks a significant effort to untangle the structure of an almost two-century-old company, one of Hong Kong's last remaining British trading houses. In 1994, Jardine moved its Hong Kong listing to Singapore, three years before Britain returned the city to China.
On completion, Jardine Matheson will become the single holding company for its subsidiaries, a move the group said will result in a "conventional ownership structure and a further increase in the group's operational efficiency and financial flexibility". The deal is expected to become effective by the end of next month.
The origins of the current structure, in the form of cross-holdings in dual holding companies and majority interests in listed subsidiaries, lie in a series of restructurings in the 1980s, the company said.
"The simplification of our ownership structure is a natural step in the evolution of the group and will create value for our shareholders," Mr Ben Keswick, executive chairman of Jardine Matheson, said in the statement.
"Taking full ownership of Jardine Strategic is consistent with our policy of investing further in the growth prospects of our existing businesses and highlights the benefits of consistently maintaining the group's financial strength."
The acquisition price of US$33 a share represents a 20.2 per cent premium to the last closing price of US$27.45 a Jardine Strategic share on March 5. The price is also at a 29 per cent and 40.3 per cent premium to the volume-weighted average closing price per share over the one-month and six-month period respectively ended March 5.
Jardine Strategic was also one of the most actively traded by value as at 10.55am yesterday, up 19.5 per cent to US$32.81, with about 1.1 million shares changing hands. A Singapore Exchange circuit breaker was also triggered during early morning trade.
The circuit breaker is activated when incoming orders potentially match an existing order at a price outside circuit breaker price bands.
When this occurs, a five-minute cooling-off period is triggered and the incoming order will be rejected. Trading can still take place during the cooling-off period, albeit within the price bands. All existing orders will not be affected and new orders within the price band can still take place.
The circuit breaker covers Straits Times Index (STI) and MSCI Singapore Index component stocks and units, among others. Hong Kong-registered Jardine Matheson was added to the STI in September 2008, with five of its subsidiaries, including Jardine Strategic, joining the index later.
Jardine Matheson said the acquisition is expected to become effective by the end of next month. It intends to cancel the 59 per cent shareholding in Jardine Matheson held by Jardine Strategic through a reduction of capital at Jardine Matheson's annual general meeting next year.
Both Jardine Matheson and Jardine Strategic will be announcing their FY2020 preliminary results on Thursday. Jardine Matheson said it expects results "to be in line with market expectations, with full-year underlying net profit of US$1,085 million and underlying earnings per share of US$2.95".
THE BUSINESS TIMES, BLOOMBERG
