Sovereign funds notch up US$24.6b in Q3 corporate purchases

[LONDON] Sovereign wealth funds increased their merger and acquisition activity to US$24.6 billion in the third quarter, propelled by deals involving Singapore's GIC Pte and Temasek Holdings as well as China Investment Corp.

Such state-owned funds were involved in 49 announced deals, up from 46 with a total value of US$15.5 billion in the previous quarter, Refinitiv data showed. The bumper second quarter total was the highest since the US$35.8 billion hit in Q2 2018. The fourth quarter is also gearing up to be a bumper period for deals, with Abu Dhabi Investment Authority this month involved in a 10.2 billion Swiss francs (S$14.19 billion) deal to buy Nestlé's Nestlé Skin Health.

The largest deal during the third quarter involved GIC and Canada's Brookfield Asset Management agreeing to buy U.S freight railroad owner Genesee & Wyoming Inc in a deal valued at about US$8.7 billion including debt, according to Refinitiv data.

"This kind of business is stable and provides security in times of big uncertainty over returns and yields," said Javier Capapé, director of the sovereign wealth research at IE Center for the Governance of Change.

GIC also participated in taking private New York-listed Tallgrass Energy, alongside Blackstone Infrastructure Partners and Enagás.

The deal showed GIC's interest in exploring private assets, which fit better in long-term investment strategies, while also tapping opportunities in the US shale industry, said Mr Capapé.

Despite uncertainty about Britain's planned exit from the European Union, several of the deals involved British assets.

Saudi Arabian sovereign wealth fund Public Investment Fund invested US$550 million in Babylon Healthcare Services, while Abu Dhabi Investment Authority agreed to take a 30 per cent stake in British home appliance care specialist Domestic & General.

REUTERS