Quoteworthy: It must be hard for you to spend 25 years talking about tariffs as being negative and then have somebody explain to you that you’re totally wrong. –— Former US President Donald Trump on trade with China, in his Oct 15 interview with Bloomberg News editor-in-chief John Micklethwait
Allianz to consider revisions to proposed Income deal; ex-Income CEO ‘welcomes’ government block
The Allianz-Income Insurance deal, which has generated significant public interest since its proposal in mid-July, received a new update on Oct 14 when the Singapore government announced its rejection of the acquisition. Two days later, Parliament passed a bill that effectively prevented the $2.1 billion acquisition from proceeding. Minister of Culture, Community and Youth (MCCY) Edwin Tong says it is “not in the public interest” for the proposed transaction to proceed “in its current form”.
“I welcome the government’s decision to change the law to reject the proposed Allianz-Income deal,” wrote ex-NTUC Income CEO Tan Suee Chieh in a LinkedIn post on Oct 14 in response. “This outcome underscores the importance of speaking up on matters of public interest and ensuring that the values of trust, integrity and governance remain at the forefront of our decision-making processes.”
Tan has been a vocal critic of the deal since it was announced. He was the CEO of NTUC Income from 2007 to 2013 before becoming group CEO of NTUC Enterprise from 2013 to 2017.
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German insurer Allianz says it will work closely with the relevant stakeholders to consider revisions to the proposed transaction structure. In an Oct 14 statement, Allianz says it respects the government’s position but is convinced that partnering with Income will benefit Singapore’s customers and society.
NTUC Enterprise, which holds a 72.8% stake in Income, says Allianz’s offer will enable Income Insurance to be even more relevant and resilient over the long term, fulfil its social commitments and meet its obligations to its policyholders. NTUC Enterprise also stated that it will examine the implications of Tong’s statement and the amendments to the Insurance Act and work closely with relevant parties to determine the appropriate next steps.
In his parliamentary speech on Oct 14, Tong explained why the government intervened to halt the Income-Allianz transaction. When Allianz offered to acquire a 51% stake in Income for EUR1.5 billion (or $2.2 billion at the time) or $40.58 per share, it proposed to run Income’s insurance business, including life insurance, more efficiently.
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In cases where an insurer has a foreign subsidiary, the insurer’s capital, along with oversight from the German or home regulator, ensures that it maintains sufficient capital for its operations both domestically and in overseas markets. Allianz has ample capital, with a capital adequacy ratio of 206%, as reported in its FY2023 annual report.
As with most mergers and acquisitions, the acquirer is likely to “upstream” dividends and surplus cash. Therefore, it is not surprising that Allianz’s capital reduction plan includes returning $1.85 billion to shareholders in the first three years.
This, however, does not sit well with a former co-operative that was able to keep its surplus when it became corporatised. Income corporatised in 2022 and was exempted from giving its $2 billion surplus back to the Co-operative Societies Liquidation Account (CLSA), as required by Section 88 of the Co-operative Societies Act (CSA), as it was merely changing its legal structure from a co-operative to a corporation.
“Technically, Income would be required to be compliant with Section 88. But Income was not, in fact, ceasing its business; it was proposing to convert to a corporation to strengthen its capital base,” says Tong. Hence, the exemption was granted.
Only after the Monetary Authority of Singapore (MAS) reviewed Allianz’s deal did it decide that Income’s planned capital optimisation could be relevant to MCCY’s views. “It was at this point after MCCY reviewed the information that we became concerned,” says Tong.
While it is “not uncommon” to free up capital to be returned to shareholders, MCCY was not confident that these proposals would not affect the ability of the co-operative movement as a whole — or of Income itself — to carry out its social mission. “We find it difficult to reconcile the proposed substantial capital reduction soon after the transaction is completed, with Income’s representations to MCCY during the corporatisation exercise that it was aiming to build up capital resources and enhance its financial strength,” says Tong. “The proposed capital structure runs counter to the premise on which the exemption was given.”
He adds: “It is also not clear what Income might do after the capital extraction, for example, to adjust or trim its insurance portfolio and what impact this could have on policyholders.”
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On the same day the deal was blocked, an initial reading to amend the Insurance Act took place. A second reading was presented in Parliament on Oct 16, during which Chee Hong Tat, deputy chairman of the MAS, proposed that the minister in charge of MAS consider the views of the MCCY when an application for regulatory approval involves an insurer that is either a co-operative or linked to one. The bill was passed that day. — Nicole Lim
Food Innovators Holdings closes 4.5% down on the first day of trading
Shares in Food Innovators Holdings (FIH) closed at 21 cents apiece on Oct 16 — its first day of trading — 4.5% below its 22-cent IPO price. FIH, which was incorporated in 2019, is a Japan-based F&B group specialising in restaurant leasing and subleasing. The group focuses on matching properties and tenants in the Japanese restaurant business and is also involved in the food retail business.
FIH has expanded internationally, operating restaurants in Japan, Singapore and Malaysia. It runs a total of 26 restaurants, along with one bakery café and one central café bakery kitchen.
The company had issued 14 million shares, including one million invitation shares, which were made available through placement. Out of the 13 million placement shares available, a total of 28 valid applications were received, which includes 47,000 placement shares allotted to FIH CEO Kubota Yasuaki.
A total of 264 valid applications were submitted for a total of 6.3 million public offer shares. Based on the one million public offer shares available for subscription, the public offer was approximately 6.3 times subscribed.
Yasuaki says: “The successful completion of our IPO marks a pivotal point in the group’s journey to bring authentic and quality Japanese cuisines to international markets. With our deep-rooted expertise in the industry, we are confident of capitalising on new opportunities and expanding our restaurant network across domestic and international markets.” — Ashley Lo
Parkway Life REIT 3QFY2024 gross revenue falls 2.2% y-o-y, DPU up 2.8%
Parkway Life REIT has reported gross revenue of $108.5 million for 3QFY2024 ended Sept 30, 2.2% lower y-o-y. This was mainly due to the depreciation of the Japanese yen, says the REIT manager on Oct 16, partly offset by contributions from the properties acquired in 2023 and 2024. Net property income for the quarter was 2.1% lower y-o-y, at $102.4 million.
The drop in revenue will be compensated by the foreign exchange gains from the settlement for the forward contracts, says the REIT manager. The REIT reported 2.8% higher distributable income of $538,000 during the quarter from Singapore hospitals and some Japanese nursing homes with step-up lease arrangements.
The quarter’s DPU is 2.8% higher y-o-y, at 11.3 cents. As the REIT makes distributions on a semi-annual basis, no distribution is set for 3QFY2024. The DPU of 11.3 cents will form part of the 2HFY2024 distribution when the REIT announces its 2HFY2024 results.
As of Sept 30, the REIT’s committed occupancy stands at 100%, with 64 leases and 34 lessees. Additionally, the REIT’s cash and cash equivalent are $37.2 million for 3QFY2024, up from $28.5 million as of the end of 2023. The REIT’s investment properties increased in value to $2.3 billion from $2.2 billion at the end of 2023. Net asset value per unit stood at $2.30 at the end of 3QFY2024, down from $2.34 at the end of 2023.
As of Sept 30, the REIT’s weighted average debt expiry stood at three years, which is expected to extend to 3.8 years after loans due in 2025 mature, along with a short-term loan drawn down for acquisitions. Meanwhile, the REIT’s gearing is at 37.5%. The REIT has a debt headroom of $321.3 million and $590.1 million before reaching 45% and 50% gearing, respectively. — Ashley Lo
Thailand unexpectedly cuts rate for the first time since May 2020
The Thai central bank cut its benchmark interest rate for the first time in more than four years, a surprise move given it has long resisted the government’s calls to ease monetary policy.
At its Oct16 meeting, the Bank of Thailand (BOT) voted five to two to cut the one-day repurchase rate by a quarter of a percentage point to 2.25%, as predicted by only five of the 28 economists surveyed by Bloomberg. The last time the BOT cut rates was in May 2020.
Two members of the Monetary Policy Committee called for the rate to be kept unchanged. The Thai rate has been at 2.5% since the fourth quarter of last year. The Committee said inflation expectations remain within target. It expects core inflation this year to be 0.5%.
The central bank had consistently signalled that it would not easily yield to the government’s pressure to cut rates and boost the economy. BOT Governor Sethaput Suthiwartnarueput said late last month central banks must have independence in setting monetary policy.
Just hours before the decision, Commerce Minister Pichai Naripthaphan called for a 50 basis point cut this year. The Federation of Thai Industries also reiterated its call for a 25 basis point reduction to ease the financial burden for businesses. — Bloomberg
