UPDATE 5-Temasek buys into StanChart, growing bank portfolio http://today.reuters.com/business/newsarticle.aspx?type=tnBusinessNews&storyID=nL27765602&imageid=&cap=
Tuesday 28 March 200
By Doreen Siow
SINGAPORE, March 28 (Reuters) - Singapore's Temasek Holdings [TEM.UL] purchased a minority stake worth $4 billion in Standard Chartered -- probably paying top dollar for the most expensive bank listed on the London stock exchange -- as the state investor increased its bet on Asia's strong economic growth.
The secretive investment firm, which is headed by Ho Ching, the wife of Prime Minister Lee Hsien Loong, has bought stakes in several Asian banks, committing some $4.5 billion to buy shares in state-owned Bank of China [BOC.UL] and Construction Bank of China [CCB.UL] in the second half of 2005. The deal for Asia-focused StanChart (STAN.L: Quote, Profile, Research) brings Temasek's total investments in the banking sector to an estimated $22 billion. Temasek's total portfolio was valued at $64 billion at the end of its last financial year in March 2005.
"Banking and finance is very much one of our themes. We like it for the broad-based economic growth," Simon Israel, an executive director at Temasek, told Reuters.
Temasek's strategy is to expand outside Singapore, reducing its Singaporean assets from one-half to around one-third of its total portfolio. Israel declined to comment on how much Temasek had invested in financial services in total.
"We are progressing in the right direction and this will certainly help that," he said. "There's still some way to go."
StanChart (2888.HK: Quote, Profile, Research) shares fell 3.4 percent to HK$202 in Hong Kong on Tuesday as the deal dampened speculation that it was a takeover target. Its London shares lost 3.5 percent.
Temasek said late on Monday that it had agreed to buy an 11.55 percent stake in StanChart from the estate of late banking tycoon Khoo Teck Puat at an undisclosed price. The deal is subject to regulatory approval.
Temasek's stake in StanChart was worth 2.3 billion pounds ($4 billion), based on Monday's closing share price of 15.24 pounds.
Analysts said they expect Temasek to continue targetting the financial sector, a good proxy for booming economies, and added that it could be interested in LG Card (032710.KS: Quote, Profile, Research), South Korea's number two credit card issuer, which is up for sale.
EXPENSIVE
Bankers in Singapore said the price actually paid by Temasek may have been calculated using the weighted average closing price of London-headquartered StanChart over a certain period of time.
StanChart shares have soared 62 percent in the last year, benefiting from its exposure to high-growth economies and takeover speculation, and trade at 3.69 times their historical book value, according to Reuters data, making it the most expensive London-listed bank.
This valuation compares with a sector average of 2.46 times book value for the other 11 banks listed on the exchange.
HSBC (HSBA.L: Quote, Profile, Research) trades at 2.06 times book, Royal Bank of Scotland (RBS.L: Quote, Profile, Research) at 1.68 and Lloyds TSB (LLOY.L: Quote, Profile, Research) at 3.2.
"It is very expensive. There were quite a few other interested parties in StanChart, like Barclays (BARC.L: Quote, Profile, Research), JP Morgan (JPM.N: Quote, Profile, Research) and Citibank (C.N: Quote, Profile, Research). It is like they (Temasek) paid for a critical call option for the future," said a European investment banker not involved in the deal.
He said Temasek had acquired a "blocking stake" which could be key in future if other global lenders want to buy a stake in the bank, which makes over three-quarters of its profit in Asia.
John-Paul Crutchley, analyst at Merrill Lynch, said Temasek's purchase would remove any near-term bid premium in StanChart's stock, though longer-term questions remain.
"We have been of the view that the ultimate acquirer of Standard Chartered would either be a U.S. or Chinese bank. By making this move Temasek have positioned themselves as the power broker," he said, adding that it could be playing a long-term regional consolidation strategy with its 28 percent interest in DBS Group Holdings (DBSM.SI: Quote, Profile, Research) - Singapore's largest bank. Temasek's Israel declined to comment on the firm's strategy regarding DBS and StanChart.
LONG TERM VIEW
"It is a good acquisition. The point is not how reasonable is the price, it is how good it is from a strategic long-term view," said Prabodh Agarwal, analyst at CLSA. "Temasek is obviously taking a three- to five-year view on Asian growth."
Gan Chee Yen, Temasek senior managing director for investments overlooking the financial sector, said investing in StanChart was important in achieving a balanced portfolio.
Including the StanChart buy, Temasek would have spent almost $9 billion on banks with operations in Asia in the last year.
Besides the recent purchases, Temasek has bought stakes in banks in Malaysia, South Korea, India and Indonesia.
Contributions from the financial industry, which accounted for 21 percent of the firm's $64 billion portfolio, look set to rise. The telecom sector accounted for 33 percent or the lion's share of Temasek's portfolio in 2005. To read a factbox on Temasek's changing portfolio, double click on <nSIN13052>
($1=1.617 Singapore Dollar)
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