Jardine Strategics Holdings

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JSH - 1H Result ended 30 June 2020
Rev USD12b (vs $15b)
Operating loss USD0.9b (vs $1.7b)
Loss after tax USD1.3b (vs $2.5b)
Interium USD10.5 cents dividend (vs 10.5cents) 
https://links.sgx.com/FileOpen/JSH.ashx?...eID=625727

Wear mask and keep your social distance, everyone

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JSH
Recommended Cash Acquisition of Jardine Strategic Holdings Limited by Jardine Matheson Holdings Limited
Cash - USD33
Expected to be paid by end Apr 2021
https://links.sgx.com/FileOpen/JSH%20J.a...eID=651170

[weijian]

Following the Acquisition, Jardine Matheson will own 100 per cent. of Jardine Strategic. Jardine Strategic currently owns 59 per cent. of Jardine Matheson. Jardine Matheson intends to implement the cancellation of Jardine Strategic's 59 per cent.
shareholding in Jardine Matheson following completion of the Acquisition (the “Share Cancellation”). The Share Cancellation will involve a separate legal process in relation to Jardine Matheson and the wholly-owned subsidiaries through which Jardine Strategic holds its interest in Jardine Matheson.

I just wonder how the above works? Is it something like a share buyback and cancel system and so everyone's stake in JM increases.

Since Jardine Strategic is a component of the STI, 1 of the REITs will be taking over very soon. Also, I wonder what has changed to make the Keswicks decide to do away with this anti takeover mechanism? I do remember Banker Ow has something similar as well.

[donmihaihai]

There is no buyback because those shares are in the hand of jardine strategic of 100% subsidiary.

The cancellation portion will be more Technically complex especially if shares are in hand of entity of different country. But this is something not of interest to most. We don't need to know how diff law works. If of the same country then it is easier

[ghchua]

Unfortunately, by unwinding this cross holding, Jardine Strategic minorities had to be taken out via amalgamation. Not only they have lost their listing status and stake in the underlying listed companies, they have also lost their 59% stake in Jardine Matheson. Granted, they have been compensated with US$33 per share, but it is still at a discount from its reported NAV of more than US$40+ per share.

I guess the deal should be net net positive for Jardine Matheson. Not only they can consolidate all of Jardine Strategic profits as their wholly owned subsidiary, they can also now account for lesser outstanding shares when computing their own businesses EPS as well, since Jardine Strategic's cross holding stake in it will be cancelled via capital reduction post amalgamation.

With this exercise, shareholders of Jardine Matheson can also look forward to higher dividend payout based higher EPS base. But of course, gearing will also be higher since they will be tapping some credit to finance this deal.

[desmondxyz]

I own u, u own me....I'm quite amazed by the cross holding scheme for Jardine family. So JSH will be delisted eventually?

[Shiyi]

I own u, u own me....I'm quite amazed by the cross holding scheme for Jardine family. So JSH will be delisted eventually?

It seems that this is already a done deal. The offeror owns some 84% stake and it needs only 75% votes to get it through. It appears that under the Bermuda law, the offeror need not abstain.

[edragon]

Unfortunately, by unwinding this cross holding, Jardine Strategic minorities had to be taken out via amalgamation. Not only they have lost their listing status and stake in the underlying listed companies, they have also lost their 59% stake in Jardine Matheson. Granted, they have been compensated with US$33 per share, but it is still at a discount from its reported NAV of more than US$40+ per share.

I guess the deal should be net net positive for Jardine Matheson. Not only they can consolidate all of Jardine Strategic profits as their wholly owned subsidiary, they can also now account for lesser outstanding shares when computing their own businesses EPS as well, since Jardine Strategic's cross holding stake in it will be cancelled via capital reduction post amalgamation.

With this exercise, shareholders of Jardine Matheson can also look forward to higher dividend payout based higher EPS base. But of course, gearing will also be higher since they will be tapping some credit to finance this deal.

Just invest in JMH with the proceeds and you get back JSH indirectly.

[weijian]

@ghchua,
Thanks for answering my question. So this exercise is equivalent to a "share buy back and then cancelling the shares". The share buyback is funded by a loan and since the shares (ie. JS's stake) are bought below NAV as you mentioned, it looks to be beneficial to parent JM.

The interesting implication for JM having high gearing (post JS acquisition), is that we can probably look forward to
(1) its subsidiaries to pay up to parent to fund its loans,
(2) JM doing a rights issue to reduce its gearing,
(3) a delay to subsidiary Jardine C&C's own rights issue to pay down ~2billion of loans at company level due to earlier acquisitions.

[donmihaihai]

Unfortunately, by unwinding this cross holding, Jardine Strategic minorities had to be taken out via amalgamation. Not only they have lost their listing status and stake in the underlying listed companies, they have also lost their 59% stake in Jardine Matheson. Granted, they have been compensated with US$33 per share, but it is still at a discount from its reported NAV of more than US$40+ per share.

I guess the deal should be net net positive for Jardine Matheson. Not only they can consolidate all of Jardine Strategic profits as their wholly owned subsidiary, they can also now account for lesser outstanding shares when computing their own businesses EPS as well, since Jardine Strategic's cross holding stake in it will be cancelled via capital reduction post amalgamation.

With this exercise, shareholders of Jardine Matheson can also look forward to higher dividend payout based higher EPS base. But of course, gearing will also be higher since they will be tapping some credit to finance this deal.

 Without this acquisition, the outstanding number of shares used by JMH should be and has been = 100% less ( 85% of 59%). With the acquisition, with or without share cancellation, total outstanding number of shares used by JMH will be 100% less 59%.
 
The NAV of JSH is calculated base on market value of subsidiaries(read small print). NAV of JSH base on equity is above USD60.
 
JSH stake in JMH should actually count those unlisted businesses at JMH level and leave out those(mainly HK Land, Jarine C&C, Dairy Farm, MH) from JSH downward or you will be double counting.
 
Net net positive for JMH? I believe so, add in > USD1B share buyback in the past year at discount to NAV. JMH will be spending USD7 to 8B, snake head eating tail. In this kind of company, shouldn’t one bet on the head not tail.