Jardine group’s S$5.5 billion deal: What are the highlights?

• Jardine Matheson Holdings (SGX: J36) share price jumps 2.2% to US$63.34
• Jardine Strategic Holdings (SGX: J37) inched up to US$32.81 per share
• JMH will buy the rest of JSH it does not already own, at US$33 per share
• Some analysts said the offer price is at a discount to net asset value
• Trade JMH or JSH shares with an IG account

Buyout at US$33 per share

Jardine Matheson Holdings (JMH) will delist the group’s second-biggest unit, Jardine Strategic Holdings (JSH), following a US$5.5 billion stake purchase.

Singapore’s largest conglomerate by market value on Monday said it will acquire the remaining 15% of JSH for US$33 in cash per ordinary share.

Investors reacted positively on Monday and Tuesday, fuelling rallies in the Singapore-listed stocks linked to the group.

As of 14:45 SGT on Tuesday, JMH jumped 2.2% to US$63.34, JSH inched up by 0.03% to US$32.81, Jardine Cycle & Carriage gained 1.6% to S$23.16, and Hongkong Land surged 5.1% to US$5.19.

Mandarin Oriental shares rose 1.8% to US$1.72, although Dairy Farm International eased by 0.9% to trade at US$4.66 after climbing 8% the day before.

Four in six analysts recommended ‘hold’ on JMH, one rated it ‘buy’, while one had a ‘sell’ call. Their average target price was US$59.45, Bloomberg data showed.

For JSH, there were two ‘buy’ calls and two ‘hold’ ratings. Credit Suisse downgraded it to ‘neutral’ with a US$33 target price.

Is the offer price fair?

The acquisition price of US$33 is 20% higher than JSH’s closing price on 05 March 2021, and at a 29% premium to the stock’s volume-weighted average closing price over the past month.

But it is still at a 19% discount to the value of its listed assets, said United First Partner’s head of Asian research Justin Tang.

He added that the simplified corporate structure could drive the group’s other stocks to trade higher, which will raise JSH’s fair value.

Analyst Brian Freitas, who publishes on SmartKarma, said the offer price was at a 30% discount to JSH’s estimated net asset value of US$46.67 per share.

Asset manager Value Square believes that as a long-term shareholder it will be ‘deprived’ of the Jardine group’s future profits, even though it can reap a short-term gain.

What is the current structure?

On completion, JMH will become the single holding company for its subsidiaries, thus improving operational efficiency and financial flexibility. The deal is slated to take effect by end-April.

The current structure comprises cross-holdings in dual holding companies and majority interests in listed subsidiaries. JMH owns about 85% of JSH, while JSH owns 59% of JMH. The group intends to cancel JSH’s 59% stake in JMH after the acquisition.

Moreover, JSH owns half of Hongkong Land, 78% of Dairy Farm, 80% of Mandarin Oriental, and 75% of Jardine Cycle & Carriage.

JMH shareholders will benefit from a ‘material enhancement’ in its earnings per share and improved capacity to pay dividends, the company said.

The China and Southeast Asia-focused conglomerate has a wide variety of businesses including hotels, cars, supermarkets, finance, engineering, mining, construction.

How to trade JMH, JSH shares with IG

Are you feeling bullish or bearish on JMH and JSH's stocks?

Either way you can buy (long) or sell (short) the asset using IG's industry-leading trading platform, by investing in the share directly, in a few easy steps:

1. Create a live or demo IG Trading Account, or log in to your existing account
2. Enter <Jardine Matheson Holdings> or <Jardine Strategic Holdings> in the search bar and select the instrument
3. Choose your position size
4. Click on ‘buy’ or ‘sell’ in the deal ticket
5. Confirm the trade