By Anshuman Daga and Aradhana Aravindan
SINGAPORE (Reuters) - Singapore's CapitaLand (SI:CATL) is forking out S$6 billion ($4.4 billion) to scoop up logistics and industrial assets from state investor Temasek, in a deal the developer said would create Asia's largest real estate investment manager.
CapitaLand will buy the holding companies of the business of the Ascendas-Singbridge Group, which manages Ascendas Real Estate Investment Trust (SI:AEMN), Ascendas India Trust (SI:AINT) and Ascendas Hospitality Trust (SI:ASHP), for cash and stock. Ascendas-Singbridge also manages private funds.
The transaction, which will give CapitaLand exposure to high-growth technology and e-commerce sectors, marks the biggest consolidation in Singapore's fragmented real estate investment trust sector. Temasek's stake in CapitaLand will rise to about 51 percent after the deal closes from roughly 40.8 percent.
CapitaLand's global businesses span shopping malls, lodging, offices, homes, real estate investment trusts (REITs) and funds. CEO Lee Chee Koon, who took charge in September, has been looking for deals to boost the group's growth.
The Temasek (TEM.UL) deal will help CapitaLand diversify and give it a footing in new markets, analysts said.
"Industrials, which are being driven up due to e-commerce demand, is an area CapitaLand sorely lacked. CapitaLand's retail mall business was also coming under a lot of pressure due to e-commerce," said Wong Yew Kiang, an analyst at CLSA.
"Industrial asset class needs scale, you have to buy a big portfolio in one go if you want to make yourself relevant," said Wong, adding investors could, however, be worried as the deal was coming when valuations had run up a fair bit and interest rates were set to increase.
The deal with Temasek's subsidiary will add logistics assets and data centers to CapitaLand's portfolio, cushioning it against increased challenges in some segments, including retail and housing in Singapore.
"This deal gives CapitaLand many more options for where growth could come from. This is part of the new CEO's vision of making CapitaLand a more global and diversified player," a person familiar with its strategy said.
The enlarged group will have total assets under management of over S$116 billion, making it the ninth biggest global real estate investment manager and just behind UBS Asset Management and CBRE Global Investors, CapitaLand and Ascendas-Singbridge said in a joint statement on Monday.
The deal will push CapitaLand ahead of its target to grow its assets under management to S$100 billion by 2020.
"This particular transaction will give us meaningful scale in key growth markets like India, which brings a lot of promise and excitement," CEO Lee said.
In a message to employees for 2019, Lee had cautioned against CapitaLand "continuing with the status quo".
"Companies either thrive, survive, or erode, especially in a world that is constantly changing. This is a time when it is dangerous to stay contented," he had said.
Temasek will effectively receive about S$6 billion, half in cash and half in new CapitaLand shares as part of the deal.
Temasek's divestment plans come just days after a source said it was in talks to sell a small portion of its 24.9 percent stake in beauty and health retailer A.S. Watson.
J.P. Morgan is the sole financial adviser to CapitaLand.
Trading in shares of CapitaLand and some of its listed REITs, and Ascendas-Singbridge's REITs, was halted ahead of the announcement.