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Desperately seeking value: Cash-flush shareholders drive Singapore buyouts
* Singapore management buyouts at $10.9 bln this yr vs $3 bln in 2011
* Beaten-down valuations, cheap financing spur buyouts
* Consumer-related, cyclical firms attractive
By Charmian Kok
SINGAPORE, Oct 11 (Reuters) - Bosses of Singapore-listed companies are taking their firms private to take advantage of beaten-down prices and cheap financing, more than trebling management buyout deals in the island-state to $10.9 billion compared with the whole of 2011.
Among Southeast Asian countries, Singapore is seeing the sharpest increase in management buyouts due to the presence of large shareholders with deep wallets in a number of companies, such as coal miner Sakari Resources Ltd. Malaysia is a distant No.2 with just $579 million of deals so far this year.
The strong balance sheets of Singapore corporates and the island's reputation for maintaining a stable operating environment also helped boost management buyout deals in the country from $3 billion last year, Thomson Reuters data shows.
Some stakeholders are taking companies private in the hopes of re-listing them at a higher price after a round of restructuring, bankers say.
The number of deals in Singapore has risen to 13 so far this year, compared with 11 for 2011, according to the Thomson Reuters data.
One of the more prominent deals was PTT Pcl's buyout offer of nearly $1 billion for Sakari Resources announced in August. The Thai energy producer, which owned almost half of the coal miner, swooped in with the offer just two months after Sakari's shares slumped to a three-year low.
"Some of the smaller companies are not trading very well in terms of valuation. The owners behind those see an arbitrage opportunity," said Alvin Lim, managing director at HSBC's Southeast Asia advisory business.
Many midcaps are also finding it hard to justify the cost of maintaining a listing due to poor trading volumes.
"In some instances of less well-followed companies, there is a case for taking the company off the market given the high cost of being listed," said Soek Ching Kum, head of Southeast Asia equity research at Credit Suisse Private Banking.
Spurred by the deals, the FTSE Mid Cap Index has jumped 26 percent this year, outperforming the benchmark Straits Times Index's 15 percent gain.
CONSUMER AND CYCLICALS
Aside from energy-related plays, the focus has also turned to the food and beverage segment following what was effectively a $6.4 billion buyout of Singapore-listed Asia Pacific Breweries Ltd by Heineken NV last month.
"There will be companies from the Western world trying to look at them to find growth or to privatise them to get a bigger proportion into their earnings," said brokerage CIMB's head of Singapore research Kenneth Ng, who expects to see more buyouts of consumer-related firms.
Although Asian consumer companies do not come cheap, many European companies, faced with tepid growth in their home markets, are willing to pay for strong Asian brands to leverage on their large sales and distribution networks.
In August, Japanese food and beverage firm Suntory Holdings Ltd, the majority shareholder of Cerebos Pacific Ltd , made a S$2 billion ($1.6 billion) offer to buy out minority shareholders of the maker of Brand's Essence of Chicken.
Analysts also list instant beverage makers Viz Branz Ltd and Super Group Ltd as possible buyout targets because of their reach in Southeast Asia's consumer markets.
On Monday, Viz Branz's second-largest shareholder Ben Chng sold about 16 percent of his stake to a consumer goods firm, with some analysts saying this could be a prelude to a buyout.
Shares in Viz Branz, which sells instant coffee brands like Gold Roast, are trading on a price-to-earnings multiple of 14.6 and Super Group at 18.8 times versus the industry average of 27.6, brokerage DMG & Partners said.
Medical devices maker Biosensors International Group Ltd , whose shares have declined about 17 percent this year on worries about falling sale prices, is also seen by analysts as a management buyout candidate.
It is 21 percent owned by Shandong Weigao Group Medical Polymer Co Ltd.
Some beaten-down commodity-related cyclical stocks also look ripe for buyouts.
Palm oil processor Mewah International Inc, whose shares have plunged 60 percent below its IPO price of S$1.10 two years ago, could be a likely candidate, CIMB said. The company's executives control nearly 87 percent.
"There will be industry sectors where valuations may fall and therefore it is easier to get hold of oil fields, gas fields, coal mines or palm oil plantations cheaper by buying the companies than by buying the actual mines or fields," said Choe Tse Wei, head of the strategic advisory group at DBS Group Holdings Ltd.
However, with a slender pipeline of initial public offerings, more de-listings could hurt Singapore, shrinking its overall market value and lowering its weighting on indices.
"Singapore's market to start with, doesn't have the breadth or depth of the bigger North Asian markets, so that's a negative development if we see more companies taken off," Credit Suisse's Kum said. ($1 = 1.2267 Singapore dollars) (Writing by Anshuman Daga; Editing by Ryan Woo)
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