Even as the $1.0 billion OSIM International Ltd (SGX: O23) is still in the process of being taken private, it seems that another billion-dollar company might be on its way out of Singapore’s stock market as well.
The company in question is China Merchants Holdings (Pacific) Ltd (SGX: C22). On Monday, the company announced that its main shareholder has decided to make a voluntary conditional cash offer to take it private. Easton Overseas Limited, a wholly-owned subsidiary of Cornerstone Holdings Limited, has offered S$1.02 per share in cash to all minority shareholders of China Merchants. Currently, Cornerstone Holdings has a 75.9% stake in the company.
If the privatization exercise is successful, China Merchants would be the next billion-dollar company to be delisted from Singapore’s stock market. At the company’s stock price of S$0.85 just prior to the announcement of the offer, it already had a market capitalisation north of S$1.5 billion.
Singapore’s sole bourse operator, Singapore Exchange Limited (SGX: S68), has been struggling to attract new initial public offerings (IPOs) these past few years. Since Keppel DC REIT (SGX: AJBU) was listed back in 2014, the exchange has only seen IPOs involving companies with market caps of less than S$500 million.
On top of that, many large companies (those with billion dollar market caps) have been taken private over the past few years. This raises the question: How might Singapore Exchange turn its fortunes around?
One area for Singapore Exchange to explore is to attract foreign-listed companies to also list their shares for trading in Singapore. IHH Healthcare Bhd (SGX: Q0F) is an example of a company that’s listed in both Singapore and Malayisa.
Last month, Malaysia-listed Top Glove Corporation Bhd (KLSE:7113.KL), the largest glove manufacturer in the world, had indicated its interest to list in Singapore’s stock market as well.
Reaching for the past
Another avenue for Singapore Exchange to grow its list of companies would be China. The company has announced that it is currently working with China Construction Bank, one of the largest banking outfits in China, to attract more Chinese firms to list in Singapore.
But, given the poor reputation of Singapore-listed Chinese firms (the S-Chips), Singapore Exchange might need to be extremely cautious when pursuing this strategy. The company might need to improve the stringency of its listing requirements for Chinese companies to ensure that the history of S-Chip scandals in the past would not repeat again.
If China Merchants is to be privatized, it won’t be good news for Singapore Exchange. Although the bourse operator is not sitting still and has been actively pursuing different strategies to increase listed members, the future is still uncertain when it comes to IPOs here.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim does not own shares in any companies mentioned.