Temasek, JTC plan to wed units, make cities

[SINGAPORE] Temasek Holdings and JTC Corporation plan to create an infrastructure and development behemoth to ride the rising wave of urbanisation washing over emerging markets, the Singapore state-owned entities announced on Thursday.

JTC, Singapore's industrial infrastructure development agency, and Temasek, an investment firm, will begin talks to explore the merging of JTC's Ascendas and Jurong International Holdings (JIH) with Temasek's SingBridge Group and Surbana International Consultants Holdings.

Both sides said they have engaged advisers and consultants as part of their due diligence process and to provide fair market valuations. Official estimates place the combined annual revenue of Ascendas, JIH and Surbana north of S$1 billion.

The operating entities of the merger candidates, including Ascendas's listed real estate investment trusts (Reits), will continue business as usual, and no general offer obligations are expected to be triggered, JTC and Temasek said in a joint statement.

In their sights is a slice of the urbanisation pie, which by some accounts could be a major theme over the next decade.

In an October 2013 report, consulting firm McKinsey reckoned that 45 per cent of Fortune Global 500 companies will be from emerging markets in 2025, up from just 5 per cent in 2000. Of the 7,000 companies that could reach US$1 billion of revenue by 2025, about 70 per cent of them are expected to be from emerging markets.

UK-based Atkins, a major player in the field, saw profit growth of 14.2 per cent in the year ended March 2014.

Dilhan Pillay Sandrasegara, head of Temasek's enterprise development group, said: "Temasek sees growing opportunities in the sustainable urban development sector. Apart from the trends we see with the increasing urbanisation in growth markets, we also see an emerging and keen interest in building sustainable cities, both inside and outside Asia."

The four entities in the proposed merger bring expertise that, when combined, will span the value chain for urban development projects.

Ascendas, a wholly owned subsidiary of JTC, is a business real estate specialist that develops and runs business, science and industrial parks. It manages three Singapore-listed Reits - Ascendas Reit, Ascendas India Trust and Ascendas Hospitality Trust.

JIH, which is also fully owned by JTC, is a consultancy and project and facilities management services provider.

Temasek-owned SingBridge is an urban investment and development company with a specialty in integrated cities and sustainable urban solutions.

Surbana is an urbanisation consultancy subsidiary of Temasek that offers solutions in areas from architecture and engineering through to urban planning and city management.

"The merged group will have the scale, capabilities and resources to participate in the entire urbanisation value chain, deepen its presence in existing markets and develop new ones. More importantly, this partnership with Temasek provides more growth opportunities for the four businesses and their people," JTC chief executive Png Cheong Boon said in a statement.

Fulfilling that ambition of creating an urbanisation legend is still in its early days. The due diligence process could take a few months and the eventual group structure has not been set, Temasek spokesman Jeffrey Fang said in response to queries.

The intention is to preserve the companies' flexibility to continue to seek business that plays to their own strengths.

"We don't intend to take away the nimbleness of these companies," Mr Fang said.

The merger could also link two major industrial property landlords in Singapore. Ascendas and Temasek's Mapletree Investments manage slightly more than 10 per cent of the country's industrial and logistics properties.

Said a JTC spokesman: "We do not expect the merger to affect industrial rentals in the market."