Southeast Asia Hits Hard in the Deals Ring

[vboy]

Totally saw this coming... Singapore gahmen has been prescient once again in aiming to be the regional arbitration hub years before all these M&A activities.

December 19, 2012, 6:41 PM
Southeast Asia Hits Hard in the Deals Ring

By Isabella Steger and P.R. Venkat

This will be remembered for being the year that Southeast Asia stole the limelight from China, playing host to some of Asia’s biggest and most contested mergers and acquisitions.

Bankers say the trend will persist, as increasingly confident Southeast Asian companies vie for assets against multinationals or each other—potentially resulting in too many buyers chasing too few assets.

M&A activity involving companies in Southeast Asia, a region dominated by Sinagpore and Thailand, stands at its highest level since the 2008 financial crisis. Deals worth $105.4 billion have either been completed or are pending completion this year, an increase of more than 50% from the $68.6 billion involving the region last year, according to Dealogic. It also accounts for a bigger chunk of deal making in the Asia Pacific region outside Japan: 26% this year, compared with 18% in 2011.

Taking center stage is the fight for Singaporean conglomerate Fraser & Neave Ltd. F99.SG -0.31% The fight began when a Thai billionaire bought stakes in the Singapore real-estate and soft-drinks firm and Asia Pacific Breweries A46.SG +0.13%, in which Fraser & Neave owned 29.7%, as the first step in taking over F&N. Dutch brewer Heineken NV HEIA.AE +1.87% responded by buying Fraser & Neave’s stake in Asia Pacific Breweries for $4.7 billion. The billionaire, Charoen Sirivadhanabhakdi, then bid for all of F&N. A company owned by Indonesia’s wealthy Riady family launched a rival offer with the support of Japan’s Kirin Holdings 2503.TO +0.39%, which owns 15% of F&N and would acquire the drinks business if that bid succeeds.

Fraser & Neave has said both existing offers from Mr. Charoen and the Riadys undervalues the firm.

Should F&N eventually be broken up, bankers say it would be just one of many major restructurings that could come for the region’s large corporations, either through spinoffs or breakups.

The saga also highlights other important trends emerging in Southeast Asia’s deal scene, say bankers. The first is Southeast Asia’s booming economies. The second is the emergence of some of Southeast Asia’s largest and wealthiest firms beyond their home markets, where they are dominant.

The F&N deal sees two Southeast Asian billionaires seeking to expand their geographic reach. Another Thai firm, Charoen Pokphand Group, an agriculture conglomerate, which is unconnected to Mr. Charoen, agreed to pay $9.4 billion for HSBC Holdings PLCâ�� HSBA.LN +2.00%s entire stake in Chinese life insurer Ping An Insurance (Group) Co. of China Ltd in this month, as it seeks to capitalize on China’s growth. That M&A deal is the biggest-ever bid by a Southeast Asian firm for an overseas asset.

“The presence of [Southeast Asian] private wealth in deals means you have a much more diversified group of buyers now in the region,” said Therese Esperdy, co-head of banking for Asia Pacific corporate & investment bank at J.P. Morgan Chase JPM -0.78% & Co. Bankers “have to think out of the box all the time.”

Financial services, agriculture and the resources sector should be the most active deal sectors in the region next year, said David Aronovitch, co-head of Morgan Stanley MS -0.16%’s Southeast Asia investment-banking business. Some of those themes were also visible in 2012.

State-backed Thai oil firm PTT Exploration & Production PCL PTTEP.TH +1.90% made waves this year when it beat out Royal Dutch Shell PLC RDSB.LN -0.23%to acquire London-listed, Mozambique-focused natural-gas explorer Cove Energy PLC for Ł1.22 billion, or US$1.95 billion.

Philippine conglomerate San Miguel Corp. SMC.PH +0.19% sold a majority stake in Bank of Commerce to CIMB Group Holdings Bhd 1023.KU 0.00%. in May for 881 million ringgit ($288.3 million).

Some insurance operations of Dutch financial-services company ING Groep INGA.AE +1.11% attracted much interest from Western and regional bidders this year AIA Group Ltd. 1299.HK -0.49% paid $1.73 billion for its Malaysian life business and Hong Kong tycoon Richard Li bought the Thai, Hong Kong and Macau businesses for $2.14 billion.

“There are good-sized markets [in Southeast Asia] where population and [economic] growth are coming to a stage where there could be explosive growth in insurance, and where there has traditionally been low penetration,” said David Chin, head of investment-banking for Asia at UBS AG.

While Southeast Asia is hot, many companies are either family- or state-owned, leaving very few assets on the block for sale, say bankers. That scarcity factor means those that are for sale don’t go cheap.

Heineken’s offer for APB, the brewer of Tiger beer, represented a price-to-earnings ratio of 35.1 times estimated 2012 earnings, compared with multiples of 20.3 times for rival Carlsberg Brewery Malaysia.

This month, Singapore-listed Petra Foods Ltd. sold its cocoa ingredients business to Swiss chocolate maker Barry Callebaut AG BARN.EB +0.17% for US$950 million to focus on making and distributing products like chocolate, wafers and biscuits. According to CIMB research, the price represents around 14 times Petra’s 2011 operating profit. That is pricey compared with some of its listed peers; JB Foods Ltd. Q0W.SG +3.85%, for example, trades at 4.6 times operating profit.

[vboy]

http://www.asialaw.com/Article/19707...ation-hub.html

[vboy]

http://www.channelnewsasia.com/stori...206789/1/.html

SINGAPORE: Prime Minister Lee Hsien Loong said that the country needs to recognise legal services as an economic opportunity in its own right, and not just an enabler for other industries.

One which serves the entire region and the world, and not just Singapore.

A key strength, is the country's rule of law, which Mr Lee said makes it well-positioned to be an arbitration hub.

He was speaking at the Congress of the International Council for Commercial Arbitration.

The gathering of legal practitioners from around the world in Singapore is testament to the nation's rising status as an international arbitration hub, only third together with Paris and Tokyo after London and Geneva.

In fact, the Singapore International Arbitration Centre has been ranked the fourth most popular arbitration institution in the world.

With a rising number of companies in Asia operating across different legal systems, arbitration becomes the default mode of resolving commercial cross-border disputes.

And Prime Minister Lee Hsien Loong said Singapore is well placed to help in this area.

"Companies want a neutral venue, not necessarily a host country or where the law is based which they're arbitrating on. We're well-positioned because of our judicial philosophy, because Singapore courts support the arbitration process and the finality of arbitration awards, so matters can be settled in months or a year or two, not decades.

"We are in good position because of our openness, you can choose any arbitrator, you can use any governing law, and foreign arbitrators don't need to obtain work permits or pay withholding tax," he said.

Singapore has actively pursued this goal updating its laws and investing in infrastructure.

Since the late 1990s, the government has been aggressively promoting Singapore's legal services industry.

[COLOR="Red"]Today, foreign law firms are free to undertake areas of Singapore commercial law and Mr Lee acknowledges that this means stiffer competition.

"Indeed, there will be pressure on local firms, especially the large ones. But taking in a broad view of Singapore legal system opening up offers enormous benefits than costs.

"We've now become a hub for commercial legal services that support investment and trade in Asia. Offshore firms bring international work to Singapore. And our young lawyers have more opportunities to build their careers," he explained.[/COLOR]

Mr Lee said this means young lawyers in Singapore too have more opportunities to build their careers at home.

Some 1,000 legal practitioners from around the world will attend the four-day congress, from 10 to 13 June, which is held every two years.

- CNA/ck

[Shanhz]

singapore has a very recognised legal system. in fact, when we are signing our international contracts, more and more clients are willing to accept it being signed under sgp laws and arbitration in sgp, as compared to the past. next to London, sgp is one of the better options.