|
Temasek makes shift to commodities
(China Daily)
Updated: 2009-06-02 08:10
 SINGAPORE: Temasek Holdings Pte, Singapore's state-owned investment company, agreed to buy a stake in Olam International Ltd, its first foray into commodities since naming Charles "Chip" Goodyear as chief executive officer-designate in February. Breedens Investments Pte and Aranda Investments Pte, two Temasek subsidiaries, will pay S$437.5 million ($303 million) for 273.5 million new shares, or 13.76 percent, in Olam at S$1.60 apiece, the Singapore-based agricultural commodities supplier said in a statement. The price is 18 percent lower than the May 29 closing price of S$1.94. Temasek is shifting to commodity investments after the global recession led to losses in financial assets. The fund sold at a loss that may total $4.6 billion its 3.8 percent stake in Bank of America Corp in the first quarter. "They'll be taking a closer look perhaps at commodities; their primary emphasis will be on diversification," said David Cohen, head of Asian economic forecasting at Action Economics in Singapore. "They were burnt by their exposure to the financials." Temasek is gaining exposure to raw materials trading after the biggest monthly jump in commodities in 34 years. It named Goodyear, the 51-year-old former head of BHP Billiton Ltd, to take over in October from Ho Ching, wife of Singapore Prime Minister Lee Hsien Loong. Olam stock has gained 77 percent this year compared with a 34 percent climb in the benchmark Straits Times Index. The value of Temasek's assets fell 31 percent to S$127 billion in the eight months to Nov 30 as the credit crisis drove down the value of stakes in Merrill Lynch & Co, Barclays Plc and Standard Chartered Plc. The MSCI World Index fell 38 percent in the same period. Ho drove an expansion outside Singapore and increased financial assets to 40 percent of the company's portfolio. Temasek's investments in energy and resources accounted for 5 percent of its portfolio at the end of March last year. Temasek, owner of five of Singapore's 10 largest companies, is expanding in Asia while reducing exposure to developed economies. Commodities prices are showing signs of a rebound less than a year after the Reuters/Jefferies CRB Index of 19 raw materials began its plunge from a July 3 record, dropping as much as 58 percent by Feb 24 as the global economy entered its first recession since the Great Depression. The index jumped 14 percent in May, the most since July 1974. The Singapore fund would consider investments in resources as the sector provided a proxy for economic growth, especially in emerging economies, Nagi Hamiyeh, managing director of investments in natural resources at Temasek, said on March 24. While Goodyear hasn't made an official statement about his plans, Melbourne-based BHP posted record profits and its stock advanced almost 350 percent under his tenure as CEO of the world's largest miner from 2003 to 2007. The Olam investment gives Temasek an interest in the company's "massive supply chain, which operates in 14 separate commodities", said Nirgunan Tiruchelvam, analyst at Royal Bank of Scotland Asia Securities (Singapore). Olam, which trades commodities including coffee, cocoa, rice, sugar, cotton, wood, nuts and spices, had total borrowings of S$3.15 billion as of March 31 and a net debt to equity of 2.51 times, according to an earnings presentation in May. Temasek will become the second-largest shareholder after Singapore-based Kewalram Chanrai Group. Temasek held a 4.9 percent stake in Olam between 2002 and 2006. Olam plans to use the proceeds from the share sale to "strengthen its equity base" and assist in its "long-term growth and expansion", the company said. Bloomberg News (China Daily 06/02/2009 page16) |
