Temasek on deal hunt to boost returns for Singapore

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Temasek has been backing a wave of worldwide dealmaking by a few of its greatest corporations because the Singaporean state-owned funding firm faces strain to spice up returns from its S$382bn (US$282bn) portfolio.

The worldwide investor has been an influential “behind the scenes” supporter of main mergers and acquisitions by corporations it has stakes in, together with Singtel, ST Engineering, Singapore Airways and Sembcorp Marine, stated two individuals conversant in the transactions.

Extra such offers inspired by Temasek, whose earnings type a significant income for the federal government’s nationwide finances, are within the pipeline, one of many individuals added.

Whereas Temasek has grow to be a consequential investor in private and non-private markets globally, Singapore-based corporations nonetheless comprise 54 per cent of its portfolio. It was shaped in 1974 to personal and handle the shares and property of the federal government. By comparability, GIC, the nation’s sovereign wealth fund, invests outdoors Singapore and manages the nation’s international reserves.

“Temasek is attempting to supercharge the animal spirits of its Singaporean corporations to make them extra world and have higher progress prospects as a result of that [helps] its personal backside line, particularly as a common election looms,” one of many individuals stated.

Lots of the corporations concerned had been scuffling with low progress prospects or flagging share costs, they added.

“I’d not say Temasek are forcing it . . . as a result of being an activist investor is just not their model, however there’s definitely a message by way of higher engagement that they want portfolio corporations to lean in. They’ve been strongly supportive of this M&A exercise behind the scenes,” they stated.

“There was strain from the federal government for a while to spice up returns,” stated one other particular person conversant in the scenario. “We’re going to see extra of this [deal activity].”

Temasek declined to remark. The corporate stated publicly this yr that extra engagement with portfolio corporations had created a “worth uplift north of S$10bn”.

The give attention to dealmaking follows Temasek reporting one among its worst annual ends in current occasions for the yr to March 2023. The corporate reported a 5.07 per cent drop in shareholder returns, its poorest efficiency since 2016. The group slowed its funding tempo for the interval, calling it “essentially the most difficult yr for markets” prior to now decade.

Temasek is owned by Singapore’s finance ministry. Lawrence Wong, who grew to become Singapore’s prime minister final month, has additionally been finance minister since 2021.

Temasek’s one-year complete shareholder return has been destructive for 2 of the previous 4 years. Nonetheless, the state group prefers to quote progress over the long run, reporting in 2023 an increase of seven.7 per cent over three years and 6 per cent over 10.

One other particular person near Temasek stated conversations about its returns with the federal government had been “not more than the same old” strain to enhance them throughout a interval of extended world financial uncertainty.

Latest offers involving Temasek-backed corporations embrace telecoms supplier Singtel, by which it’s the majority shareholder, main a $1.75bn funding this month in digital infrastructure enterprise ST Telemedia World Knowledge Centres — one other Temasek-backed firm. Singtel’s share value is buying and selling at its highest since 2022.

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In March, Singapore permitted the merger between Tata-owned Air India and sister airline Vistara, a three way partnership between Tata and Temasek-backed Singapore Airways. The deal has been touted as strengthening the nationwide service’s presence within the fast-growing Indian market as soon as it completes in 2025.

Final yr, Sembcorp Marine finalised a merger with Keppel Offshore & Marine, forming one of many world’s largest power operations and upkeep engineering corporations. Temasek, the bulk shareholder of Sembcorp Marine, was “strongly behind” the deal, one of many individuals stated.

Temasek has additionally struck a few of its personal offers. The fund bought liquefied pure gasoline dealer Pavilion Vitality to the oil main Shell this month for an undisclosed sum, though the fund had valued it at $3.63bn in March 2023.

Letter in response to this report:Singapore state investor’s long-term technique / From Lena Goh, Managing Director, Public Affairs, Temasek, Singapore

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