Jardine Strategics Holdings

[Shiyi]

https://www.ft.com/content/d617d57e-a7db...6f19b05c7b

Any FT subscriber out there that can share the full text of the article here?

[stolt46]

Any FT subscriber out there that can share the full text of the article here?

This is a reprint of that article on digitpatrox.com:

Family business: Ben Keswick’s grand plans to modernise Jardine Matheson

By his mid-twenties, Ben Keswick was being groomed to run the enterprise his household has led for 5 generations in Hong Kong and changed into a $50bn pan-Asian empire.

This week, aged 48 and fewer than two years into his position as taipan — or prime boss — of Jardine Matheson, Keswick has pulled off one of many largest company restructurings within the firm’s historical past.

The deal, during which the Jardines group will purchase out the shareholders of its second-largest enterprise unit for $5.5bn, might add huge sums to the Keswicks’ multibillion-dollar fortune and that of two different households linked by marriage, the Weatheralls and the Jencks.

But it additionally presents dangers for the 190-year-old enterprise. Keswick will unwind a convoluted cross-holding construction devised by his uncle, Sir Henry Keswick, within the Nineteen Eighties to defend it from the specter of a hostile takeover. The set-up allowed the descendants of the group’s founding household to regulate an enormous conglomerate whereas holding solely about 17 per cent of the inventory.

Keswick is attempting to “modernise the enterprise at an pressing tempo” stated one confidante, an adviser to Jardines’ board.

Nevertheless, “it creates a extra typical set of dangers”, the particular person added, “the biggest being what occurs in the event that they don’t ship the numbers in two or three years”.

A canny deal for Jardines
Jardine Matheson’s dominance is felt all through Hong Kong. Its sprawling belongings within the metropolis embody a few of Hong Kong’s costliest business properties and its largest manufacturers, such because the Mandarin Oriental resort. Elsewhere, its holdings vary from Vietnam’s largest dairy producer to a small cement maker in Thailand.

Jardine Matheson’s in depth holdings in Hong Kong embody a few of the metropolis’s prime business properties, such because the Mandarin Oriental resort © Alamy
However its huge portfolio has attracted criticism. Jardines is “in round 28 completely uncorrelated sectors acquired by Henry [Keswick] over the 47 years he was on the prime of the agency, and it’s actually laborious for anybody to articulate why”, stated one adviser to the enterprise. “Beneath Ben, you’ll begin to see them handle their portfolio with a sharper deal with sectors and return on capital.”

The Keswicks have managed the group for 5 generations since Thomas Keswick, from Dumfriesshire in Scotland, married the niece of Scottish dealer William Jardine, who had began a service provider enterprise in Hong Kong to commerce tea and opium.

However maintaining the household on the helm has required some politically unpopular strikes. Jardines angered Beijing within the mid-Nineteen Nineties when Henry Keswick relocated its Hong Kong inventory market itemizing to Singapore amid considerations in regards to the territory after its handover to China in 1997.

Keswick inherited the chairmanship from his uncle, Henry, who retired aged 80. “Ben is a consensus chief the place Henry was a conviction chief,” stated one particular person near the enterprise.


Henry Keswick, former chairman of Jardine Matheson, and the fourth technology of Keswicks to regulate the conglomerate
Henry — who has been described by the FT as a “tall, round-faced Outdated Etonian with a courtly air and a mischievous sense of humour” — didn’t have any kids, leading to a succession battle that pitted Ben in opposition to his cousin, Adam, a board director of Jardines.

“I’m positive Adam was upset however I haven’t seen any issues between the 2,” stated an govt who advises the board. “They’ve an excellent working relationship and collectively have masterminded the restructuring.”

The overhaul has to this point been considered positively by the market. Shares within the group rose 15 per cent after the announcement and have continued to climb.

“It was definitely an excellent deal for Jardine Matheson,” stated Hugh Younger, Asia head of Aberdeen Commonplace, whose stake in Jardine Strategic shall be purchased out at $33 a share. “It was arguably price much more”.

future proof a conglomerate
Keswick is considered by allies and individuals who know him as each “brilliant” and “paranoid”.

“He has a powerful sense of obligation to the corporate but in addition is aware of their historical past can not outline it,” stated one ally.

In frequent together with his uncle, stated pals, Keswick has not made a taboo of the corporate’s position within the Sino-British opium wars. Each have approached constructing a relationship with China — which is essential to Jardines’ future in Hong Kong — by being upfront about their household’s previous.

“We’ve got had lengthy discussions about Jardines’ historical past within the opium commerce,” stated the chairman of a serious monetary companies agency who has labored with the group for some years. “[Ben] doesn’t take himself too critically in these discussions.”

Keswick, who lives in Hong Kong together with his spouse, Martha, and 4 kids, is “intensely non-public”, in keeping with one good friend. He has by no means given a media interview.

Now, his largest problem is future-proofing Jardine after a big hit to its property and resort portfolio throughout the pandemic and following two years of political disaster in Hong Kong, the place it makes greater than a 3rd of revenues.

Really helpful

He has made quite a lot of decisive strikes since taking up in 2019. Amongst them was appointing a “recent blood” board that features Stuart Gulliver, the previous chief govt of HSBC, and Anne O’Riordan, ex-head of life sciences at Accenture, who has been tasked with overhauling the digital technique of Jardines and its portfolio corporations. Beforehand, its board was dominated by former executives of the corporate and relations.

Keswick has additionally created Jardine’s first funding committee, quashing a cultural hangover from his uncle’s tenure that meant the chairman had remaining management of all funding choices. This week, he additionally introduced a strategic funding partnership with Chinese language non-public fairness agency Hillhouse Capital.

In a 2016 article in Jardines’ firm journal, Thistle, he wrote about his ambitions for bringing the enterprise into the twenty first century. “As soon as we have now taken that first step, there isn’t any wanting again . . . We simply have to face the long run and provides it a go.”

5 years on, the way forward for one in all Hong Kong’s oldest enterprise empires is squarely in his palms.

[weijian]

Well.. JMH was trading above book few years back. so conglomerate and cross holding premium?

It is probably just the Market over extrapolating good times into the future, and getting a bit crazy. We are seeing that every NOW and then.

[ghchua]

Dear all,

JSH had announced its FY2020 results. So, I thought we can continue our discussion here based on the latest numbers below:

1. NAV based on market value of subsidiaries - USD58.22. donmihaihai mentioned earlier on in this topic that NAV of JSH based on equity is above USD60. I dunno what is the latest number but using market value looks close enough here, as there is not much change in equity during this one year period.

2. Cash and liquid funds in JSH corporate level increased to around USD2.7B, within the range that donmihaihai had estimated.

3. As suspected earlier, JSH did not take JMH scrip dividend again in FY2020, making it two consecutive years since FY2019 that they did not take JMH scrip dividend.

[ghchua]

Dear all,

Corporate governance issues to take note of when investing in secondary listings on SGX. JSH is a good case study.

JARDINE STRATEGIC ACQUISITION: A SHORTFALL OF CORPORATE GOVERNANCE
https://governanceforstakeholders.com/20...governance

[ongweehiang]

*Edited for clarity

Jardine Strategic is now above USD33 and JMH also rallied higher, which means that 

• the market expect that JMH will raise its bid? or 
  
• does it expect the deal to fail and more strategic option will be unlock?
  

Interesting to see what the market is getting to.

Follow us at www.weightedresearch.com

[Big Toe]

Jardine Matheson Holdings behaved exactly like how big conglomerate would behave. Any expectation of management yielding to smaller stakeholders is wishful thinking. And for that matter minority shareholders who expects high corporate governance will be sorely disappointed and frustrated most of the time, irregardless of the company they hold. Having lower expectations is the secret to a happier and perhaps more fruitful investment journey.

As the world moves ever faster, expectations are many a times far fetched when measured against reality. When you start a business, start up losses are the norm and can stretch for a few years before seeing light, chances of success is near 0 if runway is not long enough. It is somewhat similar to investing in the stock market. Ownership vs speculating / Trading.

As long as management/company is honest, competent and generating a fair amount return over a prolonged period of time and will continue to do so in the future, we ought to let the company run its course. Bonus if they pay a decent dividend.

[ghchua]

Jardine Matheson Holdings behaved exactly like how big conglomerate would behave. Any expectation of management yielding to smaller stakeholders is wishful thinking. And for that matter minority shareholders who expects high corporate governance will be sorely disappointed and frustrated most of the time, irregardless of the company they hold. Having lower expectations is the secret to a happier and perhaps more fruitful investment journey. 

Hi Big Toe,

I disagree with you here. Many JSH minorities are not small time shareholders as you have seen in many mid to small cap stocks listed on SGX. This is because JSH is a STI index stock, so most passive and actively managed funds invested in it. These institution investors are not small time retail investors. They are managing millions and billions of dollars on behalf of their clients. They certainly have the resources to take JMH to the Bermuda court and fight for a better price for JSH. The question is whether they are willing to take up this option as the process might be long drawn and it benefits neither party.

And due to the cross holding structure, many of these funds are actually shareholders of JMH as well. So, do JMH want to sour its relationship with these investors?

As to ongweehiang obeservations, I really have no answer to his questions. But based on both JMH and JSH price movements, if you really want me to guess, I think the market is pricing in a happy ending for both companies. That is, a slightly higher JSH amalgamation price to satisfy JSH minorities and JMH shareholders will still benefit from it.

[Corgitator]

Jardine Matheson Holdings behaved exactly like how big conglomerate would behave. Any expectation of management yielding to smaller stakeholders is wishful thinking. And for that matter minority shareholders who expects high corporate governance will be sorely disappointed and frustrated most of the time, irregardless of the company they hold. Having lower expectations is the secret to a happier and perhaps more fruitful investment journey. 

Hi Big Toe,

I disagree with you here. Many JSH minorities are not small time shareholders as you have seen in many mid to small cap stocks listed on SGX. This is because JSH is a STI index stock, so most passive and actively managed funds invested in it. These institution investors are not small time retail investors. They are managing millions and billions of dollars on behalf of their clients. They certainly have the resources to take JMH to the Bermuda court and fight for a better price for JSH. The question is whether they are willing to take up this option as the process might be long drawn and it benefits neither party.

And due to the cross holding structure, many of these funds are actually shareholders of JMH as well. So, do JMH want to sour its relationship with these investors?

As to ongweehiang obeservations, I really have no answer to his questions. But based on both JMH and JSH price movements, if you really want me to guess, I think the market is pricing in a happy ending for both companies. That is, a slightly higher JSH amalgamation price to satisfy JSH minorities and JMH shareholders will still benefit from it.

From my experience many years ago, the traditional fund families (e.g. Schroders, Aberdeen, Fidelity, T Rowe) generally have little interest in squeezing out the last cents. To them, once the takeover is announced, the bulk of returns is already secured.

Some of them don't even stay around till the deal's completion, preferring to sell to the market because they do not want to take on the deal risk. This is partly why you see a sudden surge in volume after the announcement. There's an exchange of risk between the long-only guys and the merger arbitrage guys.

The ones that do care are probably the activist funds, but those funds have a smaller presence in Asia (as of now). Also doesn't help that shareholding structure in Asia tends to be a lot more concentrated than in the US (in the States, just holding 5% stake is a really big deal in most cases because of the fragmented shareholding structure). So activist funds may find it harder here. Maybe as they gain popularity, we will start to see more push-back. Just my two cents.

[ghchua]

Things to take note here:

1. United First Partners is taking the lead here.

2. Subjected to collectively at least 300,000 shares or US$10 million in value from such individual dissenting shareholders.

3. Direct representation for each individual shareholder as a client. However, to help defray the costs, they will charge only a pro-rata cost based on shareholding. Shareholders will need to discuss the fees directly with the lawyers.

Sias organising representation for Jardine Strategic shareholders in Bermuda court
https://www.businesstimes.com.sg/compani...muda-court