As part of its plans to simplify the parent company structure of Jardine Matheson Holdings, the group is planning a cash acquisition of 15% of Jardine Strategic Holding's issued share capital which is not already owned by Jardine Matheson and its wholly-owned subsidiaries.
The transaction is part of an exercise to streamline the group’s current cross-holding structure, in which Jardine Strategic presently owns a 59% stake in Jardine Matheson.
The acquisition for the 15% stake in Jardine Strategic is priced at US$33 ($44.27) per strategic ordinary share for a total valuation of US$5.5 billion. The proposed price represents a premium of 20.2%, 29% and 40.3% to its last closing price, one-month volume-weighted average closing price, and six-month volume-weighted average closing price respectively, as of March 5.
The acquisition will be funded through a financing facility that Jardine Matheson has put in place, as well as existing cash resources and available lines of credit. The acquisition is expected to be completed by the end of April.
Under the terms of to the acquisition, Jardine Matheson intends to cancel Jardine Strategic's 59% shareholding in Jardine Matheson.
In a filing to SGX on March 8, Jardine Matheson states that the simplification of the group's structure will bring significant benefits to shareholders, including a more transparent ownership model, better operational flexibility, a material enhancement to earnings per share, and support for Jardine Matheson’s dividend-paying capacity.
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Following the completion of the streamlining exercise, Jardine Matheson’s earnings per share (EPS) are expected to significantly increase, given the consolidation of Jardine Strategic’s profits as a wholly-owned subsidiary and a reduction in the average number of shares used to calculate underlying EPS will be reduced.
The company noted that on a pro forma basis, the transaction would have resulted in Jardine Matheson’s 2020 earnings increasing by approximately US$83 million, with the average number of shares used to calculate underlying earnings per share reducing from 368 million to 304 million.
Ben Keswick, Executive Chairman of Jardine Matheson, says that the simplification of the group’s ownership structure is a natural step in its evolution and will create value for shareholders.
“Taking full ownership of Jardine Strategic is consistent with our policy of investing further in the growth prospects of our existing businesses and highlights the benefits of consistently maintaining the Group’s financial strength,” he says.
“This move also enables us to demonstrate unequivocally the substantial and continuing commitment of our core shareholder base, which has always been such a vital element in the long-term success of Jardine Matheson,” he adds.
Shares in Jardine Matheson closed down 30 US cents or 0.6% lower at USD$53.69, while shares in Jardine Strategic close up 35 US cents or 1.3% higher at USD$27.45 on March 5.
