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Jardine Matheson is finally tidying up some decades-old unfinished business. The Hong Kong conglomerate has been made up of a complicated web of crossholdings since the 1980s. It now plans to streamline the group by buying the 15 per cent of shares it does not already own in Jardine Strategic Holdings. It is a good move made at the right price.
Jardine Matheson will delist Jardine Strategic — both listed in Singapore — in a $5.5bn buyout. It will acquire the remaining shares of the group’s second-largest unit for $33 per share and make Jardine Matheson the holding company for its subsidiaries.
The deal makes sense, even if it is priced at a 20 per cent premium to Friday’s closing price. Shares of Jardine Strategic are trading at the lowest level in more than a year and have long traded below net asset value. They currently trade at a steep discount to peers such as Swire Pacific on an enterprise value to trailing ebitda basis.
The deal also creates a revaluation profit for the buyer. Jardine Matheson’s underlying net profit for last year will increase by about $83m. This comes at a good time. The near two-century-old group is heavily exposed to the property market in Hong Kong through affiliate Hongkong Land, where protests and Covid-19 travel curbs have hit profits. It also has a substantial presence in Singapore’s real estate market and businesses in south-east Asia, including restaurants, café chains and hotels such as the Mandarin Oriental chain. All have lost sales in the pandemic.
Longer term, however, the group’s position in south-east Asia’s growing car sales businesses looks more positive. Demand for luxury cars started to recover late last year, led by sales in Asia. Grocery store chains also offer diversification and growth prospects in north Asia and Singapore.
Shares of Jardine Matheson and Jardine Strategic rose more than 15 per cent on Monday. That reflects hopes that the deal will help the group to get through the pandemic with limited damage. It has survived worse over the centuries.
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