Thursday, 18 July 2019

Up and running

  • Print
  • Share
  • Save

The chase for the assets of Singapore’s Fraser & Neave, involving Thai, Indonesian, Dutch and Japanese suitors, gave a tantalising glimpse of the potential for cross-border deal-making in South-East Asia.

Participants compete in a dragon boat race at Hong Kong's Stanley Bay to celebrate the annual Tuen Ng or Dragon Boat Festival.

Source: Reuters/Kin Cheung

Participants compete in a dragon boat race at Hong Kong’s Stanley Bay to celebrate the annual Tuen Ng or Dragon Boat Festival.

Having long playing second fiddle to the bigger economies of China and India, South-East Asia is now beginning to make its mark in acquisition financing in Asia. M&A and related financing activity out of Asia was patchy in 2012 with a handful of large transactions keeping loan bankers occupied amid tight market conditions. The outlook for M&A lending, however, has improved significantly – and South-East Asia is leading the charge.

Countries that hardly registered on the radar of financiers previously are now presenting opportunities for event-driven financings. Malaysia and the Philippines – markets that otherwise generate little for foreign lenders – are in the thick of the action alongside Thailand and Singapore, carrying over into 2013 the momentum generated last year.

“Recent big-ticket acquisitions of Thai business groups show they are looking to use the capital accumulated over the last decade and making up for the lost time during which they held back on aggressive overseas acquisitions due to uncertainties at home,” said Ali Abbas Alam, co-head of the emerging markets financing group for Asia at Credit Suisse.

The surge in Thailand outbound M&A activity, in particular, was an eye-opener, as tycoons in the kingdom made their presence felt overseas. After acquiring an initial 22% stake in Fraser & Neave, Thai billionaire Charoen Sirivadhanabhakdi locked horns with Indonesian magnate Stephen Riady in a drawn-out battle for control of the Singapore-listed conglomerate.

Charoen finally won the months-long battle, but not before it had created competitive tension and interest for M&A bankers and financiers that prompted multi-billion-dollar financings. It also proved that market conditions were on the upswing.

“The strong response from the bank market on recent, big-ticket acquisition financings illustrates the strength of liquidity and credit appetite in the lending community,” said Cristian Jonsson, global head of loan syndications at Standard Chartered.

“There has also been an increase in the activity of regional banks, such as DBS Bank, CIMB and Maybank in a number of M&A financings. It serves as a good complement to the foreign banks active in this area,” he added, alluding to the F&N takeover financings for Charoen companies Thai Beverage and TCC Assets.

The F&N takeover financing propelled three countries – Indonesia, Singapore and Thailand – to centre-stage, with DBS and UOB lending S$9bn (US$7.2bn) to the Thais, while Bank of America Merrill Lynch and Credit Suisse committed around US$10bn to the rival Indonesian-led consortium.

“Singapore is beginning to see mega deals on the same scale as the US and Europe. The market has come of age and there is capacity for deals that are properly structured. This is evident in the debt of over US$20bn raised by the two competing bidders in the F&N acquisition,” Alam said.

Another opportunity arose from Thailand earlier this year, when the country’s richest man, Dhanin Chearavanont, acquired a 15.6% stake in Ping An Insurance (Group) of China from HSBC. China Development Bank initially agreed to lend around US$6bn to fund Dhanin’s CP Group for the stake purchase, but backtracked later. It is not clear how CP Group raised the money to pay for the purchase, but speculation is that it came from Thai lenders.

Financings in Malaysia and the Philippines have also lifted spirits among Asia’s loan bankers. Malaysia may not have created waves with multi-billion-dollar acquisition loans, but reasonable-sized event-driven financings pop up regularly.

One example is the buyout of Malaysian fast-food-chain operators KFC Holdings (Malaysia) and QSR Brands. CIMB sole underwrote a M$2bn (US$654.8m) leveraged buyout financing backing the acquisition by CVC Capital Partners and state investment arm Johor Corp.

Other financings from Malaysia include the US$1.87bn bridge loan for SapuraKencana Petroleum’s proposed acquisition of Seadrill’s tender oil rig business, and multiple loans for Employees Provident Fund. An EPF-led consortium is seeking a £405m (US$615m) five-year term loan to back its purchase of 12 acute-care hospitals across the UK.

The Philippines has been an unlikely destination for LBOs in the past, but activity there is also picking up. A rare US$195m five-year financing is in the market to back CVC’s purchase of a majority stake in SPi Global Holdings, the outsourcing unit of Philippine Long Distance Telephone.

“Financial sponsors are increasingly showing interest in South-East Asia. This is evident from recent transactions involving CVC Asia Pacific’s buyouts of KFC in Malaysia and SPi Global in the Philippines. KKR’s opening of an office in Singapore is another sign of its commitment to this region. There is potential for M&A and buyout volumes to increase in the near to long term,” said Jonsson.

Amid the frenzy in bond markets that has drawn South-East Asian borrowers in their hordes, the uptick in acquisition-related business has helped ensure that loan bankers also have a piece of the action.

To see the digital version of this report, please click here.

  • Print
  • Share
  • Save