SINGAPORE (Nikkei Markets) -- Singapore property giant CapitaLand will buy a group of companies from state investment firm Temasek Holdings for $4.4 billion in a deal that will create Asia's largest real-estate fund manager.
CapitaLand's purchase of Ascendas-Singbridge, which manages several listed real estate investment trusts, follows recent mergers in Singapore's property fund management industry as it tries to build scale and expand globally.
In September, property developer OUE bought a controlling stake in Bowsprit Capital from sister company Lippo Karawaci to create a single asset management platform, while two property trusts, ESR-Reit and Viva Industrial Trust, merged in October.
The CapitaLand-Ascendas-Singbridge deal is the largest property transaction in Singapore since a group of Chinese investors bought global warehouse operator GLP in a deal worth $16 billion dollars, according to data compiled by Dealogic. That deal was completed in January 2018.
"Even though we are global, our exposure is mainly in Singapore and China. This particular transaction will give us meaningful scale in key growth markets like India," CapitaLand group CEO Lee Chee Koon said at a briefing.
So far, CapitaLand, Southeast Asia's largest developer, has focused on residential housing, malls, offices and serviced residences. It currently owns or manages over 92 billion Singapore dollars ($68 billion) in real-estate assets. Besides Singapore and China, it has a large presence in countries such as Vietnam and Indonesia. Its listed property funds include CapitaLand Mall Trust and CapitaLand Commercial Trust.
Temasek unit Ascendas-Singbridge has S$23.6 billion in property assets under management, mainly in industrial properties such as business parks, warehouses and data centers. It is active in Singapore and China and counts India, Australia, the United Kingdom and the U.S. among its major markets. Its listed REITs include Ascendas Real Estate Investment Trust and Ascendas India Trust.
The combined entity will be the world's ninth-largest property fund manager, ahead of companies like Principal Real Estate Investors and AXA Investment Managers - Real Assets.
"Our fund management business will be strengthened by the enlarged platform," Lee said, adding that the company would have more options to decide how to deploy capital between emerging and developed markets.
Under the terms of the agreement, CapitaLand will pay Temasek S$3 billion in cash and another S$3 billion in new CapitaLand shares valued at S$3.50 a share, or 7% above the last traded price.
The Singapore developer will also assume responsibility for some S$4.9 billion in net debt and minority interest, giving the deal an enterprise value of nearly S$11 billion.
Temasek, which is wholly owned by the Singapore government, will own 51% of CapitaLand after the transaction is concluded, up from 40.8%.
Andrew Lim, CapitaLand's chief financial officer, said at the briefing that the company would not issue new shares to fund the Ascendas-Singbridge acquisition beyond those to be issued to Temasek, which means there would be no further share dilution.
Lim also indicated that the high debt level as a result of the acquisition would be temporary. CapitaLand would work to reduce its debt-to-equity ratio, from 0.72 after the deal completes to 0.64 by the end of 2020, through asset sales and utilizing cash from operations.
The deal requires approval from CapitaLand's minority shareholders at an extraordinary general meeting to be held before the end of June.