One of Hong Kong’s oldest business empires, Jardine Matheson, has announced plans for a sweeping restructuring that is expected to sharply increase its market value but could expose it to hostile bids.
Jardine Matheson said it would delist its second-largest unit, Jardine Strategic, in a $5.5bn buyout deal aimed at simplifying a complex, cross-shareholding structure originally set up to thwart takeover bids.
The 190-year-old group is considered one of the territory’s original hongs, or British owned trading houses. It controls a large proportion of Hong Kong’s prime property and major brands, including the Mandarin Oriental Hotel, real estate group Hongkong Land and supermarket operator Dairy Farm, which holds the local 7-Eleven franchise. The group moved its listing from Hong Kong to Singapore in 1994.
It bears the names of two founders, British merchants William Jardine and James Matheson, but is today controlled by the Keswick family, a clan of Scottish-origin that married into the Jardine dynasty in the 19th century.
The deal, announced on Monday, will unwind the cross-holding structure, which has been bitterly opposed by Jardine’s minority shareholders. In 2000, Jardine saw off a challenge from US fund manager Brandes Investment Partners that sought to restructure the group.
Monday’s deal means that Jardine Matheson will become the sole holding company for all subsidiaries. The “collective shareholdings of all family members and related interests” would total about 43 per cent after the transaction, the company said.
Jardine Matheson said the move would result in a “conventional ownership structure and a further increase in the group’s operational efficiency and financial flexibility”. The deal is expected to be completed by the end of April.
“Taking full ownership of Jardine Strategic is consistent with our policy of investing further in the growth prospects of our existing businesses,” Ben Keswick, the group’s executive chairman, said in a statement.
Currently, Jardine Matheson Holdings owns 85 per cent of the issued share capital of Jardine Strategic, while Strategic holds 59 per cent of Matheson.
Their shares have risen 2,800 per cent and 2,400 per cent respectively since 2000, compared with a 70 per cent rise for the Hang Seng index and a 20 per cent rise for the Straits Times index during that period.
However, the cross-shareholding structure has led the two companies to trade at large discount to their net asset values, reaching up to 55 per cent at Jardine Strategic.
The cross-holding structure was created in the 1980s as a defensive move by the Keswick family to prevent a takeover of Hongkong Land. It has made hostile takeovers difficult because many of the directors sit on the boards of both companies.
Analysts have said dismantling the cross-shareholdings would be positive for Jardine’s minority investors but could expose the group to activist investors if it started to underperform.
However, Nicolas Van Broekhoven, insight provider at independent research platform Smartkarma, said a hostile takeover would be “very unlikely”. The family and the group’s directors would “probably buy back Jardine Matheson shares aggressively [to] get back to 50 per cent ownership [and be] untouchable to any outside risk”, he said.
Jardine Matheson is Singapore’s biggest conglomerate by market value, with a capitalisation of $43.3bn. Its shares rose 10 per cent after the restructuring announcement, under which it will acquire the stake it does not already own in Jardine Strategic for $33 in cash per share.