Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Temasek has been backing a wave of international dealmaking by some of its biggest companies as the Singaporean state-owned investment company faces pressure to boost returns from its S$382bn (US$282bn) portfolio.
The global investor has been an influential “behind the scenes” supporter of major mergers and acquisitions by companies it has stakes in, including Singtel, ST Engineering, Singapore Airlines and Sembcorp Marine, said two people familiar with the transactions.
More such deals encouraged by Temasek, whose profits form a major source of revenue for the government’s national budget, are in the pipeline, one of the people added.
While Temasek has become a consequential investor in public and private markets globally, Singapore-based companies still comprise 54 per cent of its portfolio. It was formed in 1974 to own and manage the shares and assets of the government. By comparison, GIC, the country’s sovereign wealth fund, invests outside Singapore and manages the nation’s foreign reserves.
“Temasek is trying to supercharge the animal spirits of its Singaporean companies to make them more global and have better growth prospects because that [helps] its own bottom line, especially as a general election looms,” one of the people said.
Many of the companies involved were struggling with low growth prospects or flagging share prices, they added.
“I would not say Temasek are forcing it . . . because being an activist investor is not their style, but there is certainly a message through greater engagement that they would like portfolio companies to lean in. They have been strongly supportive of this M&A activity behind the scenes,” they said.
“There has been pressure from the government for some time to boost returns,” said another person familiar with the situation. “We are going to see more of this [deal activity].”
Temasek declined to comment. The company said publicly this year that more engagement with portfolio companies had created a “value uplift north of S$10bn”.
The focus on dealmaking follows Temasek reporting one of its worst annual results in recent times for the year to March 2023. The company reported a 5.07 per cent drop in shareholder returns, its poorest performance since 2016. The group slowed its investment pace for the period, calling it “the most challenging year for markets” in the past decade.
Temasek is owned by Singapore’s finance ministry. Lawrence Wong, who became Singapore’s prime minister last month, has also been finance minister since 2021.
Temasek’s one-year total shareholder return has been negative for two of the past four years. However, the state group prefers to cite growth over the longer term, reporting in 2023 a rise of 7.7 per cent over three years and 6 per cent over 10.
Another person close to Temasek said conversations about its returns with the government were “no more than the usual” pressure to improve them during a period of prolonged global economic uncertainty.
Recent deals involving Temasek-backed companies include telecoms provider Singtel, in which it is the majority shareholder, leading a $1.75bn investment this month in digital infrastructure business ST Telemedia Global Data Centres — another Temasek-backed company. Singtel’s share price is trading at its highest since 2022.
In March, Singapore approved the merger between Tata-owned Air India and sister airline Vistara, a joint venture between Tata and Temasek-backed Singapore Airlines. The deal has been touted as strengthening the national carrier’s presence in the fast-growing Indian market once it completes in 2025.
Last year, Sembcorp Marine finalised a merger with Keppel Offshore & Marine, forming one of the world’s largest energy operations and maintenance engineering companies. Temasek, the majority shareholder of Sembcorp Marine, was “strongly behind” the deal, one of the people said.
Temasek has also struck some of its own deals. The fund sold liquefied natural gas trader Pavilion Energy to the oil major Shell this month for an undisclosed sum, although the fund had valued it at $3.63bn in March 2023.