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LoginHas GIC really done its strategic buy of Barclay?
4 posts
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What we know is whenever any business entity tries to acquire companies for expansions or activities it will adopt a certain kind of strategy such as a visionary plan to expand its business horizontally or vertically.
At least like Oei Hong Leong do a thorough asset-strip valuation of ailing state companies in buying such companies in China or National Iron in Singapore. He has benefitted from such asset buys many times because he knows how to go for net tangible assets and introduce strategic plan to expand or reposition the business to nurse back such take-over for gains.
We have heard of GIC buying Barclay shares worth billions at the early days of US sub-prime crisis. Without having conceived earlier of any plan to invest in such companies can we believe GIC ever has says any good plan like Oei or Warren Buffet in making such buy especially when it is done all because of the unexpected Sub-prime crisis.
Before the crisis has GIC already conceptualized certain plans for taking over some such businesses like Barclay and what was its strategy for such acquisition or taking of stake in such banks?
Now that GIC has seen Barclay's share prices diving further by the billions dropping to half (57% of original purchase price as reported last week) so its CEO, Dr. Tony Tan and MM Lee decided to buy another few billions to average the purchase price hoping the original purchase price will bounce back in 10 years' time.
Does it make sense to throw monies just because GIC has the monies to do so? Let us see the GIC evaluation sheet to see what is its CEO talking about.
If the CEO is not well informed let him consult Dr. Tony Tan and if Dr. Tan is not up to it, let him get further instruction from his Mentor MM Lee.
Let us see much is the total values of Barclay at the first purchase which has now dropped more than 57% and do another evaluation based on further devaluation how much is the total net asset left plus goodwill.
In the case of any acquisition, the balance sheet surely would show the total of net fixed and current assets comprising equity, stocks, equipment, properties, minus fixed and current liabilities.
From the net assets left GIC could do a goodwill valuation of all its customer base and its personnel and expertise.
What if the large proportion of the customer base and expert personnel are likely to be lost or migrated and staff largely retrenched to cut losses, what will be the final net worth of Barclay.
If assuming Barclay's net assets are hardly at 20% of original values is it worth to pay the Barclay share prices at close to between 30-60% of original purchase price?
On top of this share price evaluation let us see the GIC strategy in using Barclay to expand our banking business to the world?
Has it the ability based on its overall resource to nurse Barclay back to former health or even expand horizontally or vertically.
So if GIC does not have such a comprehensive strategic plan what is the point of buying more Barclay at another few billions of down-trodden shares.
GIC might as well consult Warren Buffet how to park its monies in safer haven while earning higher returns from positive activities like strengthening the domestic export-substitution investments to put idling manpower and empty land and properties to good use.
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It is another expensive lesson learned. Strategy requires entrepreneurial abilities like turning our assets of educated workforce, good locations and transportations and storage into good use to support many regional activities.
If GIC has the strategy it would definitely by now plow back some billions and the gains made in earlier investments to where the mouth is.
At least many of our own citizens could be employed in such activities like import substitutions agricultural productions which will lessen our reliance on imports of essential goods and foods to save on foreign exchanges.
Through our education hub we could also build up our educational resources into assets providing diverse skill trainings to create employment for our many younger idling manpower.
We could turn our empty lands and factories into business activities to lessen our reliance on imported foods, agricultural products and simple terminals and storage facilities to benefit our logistics and transportations all of which we are still commanding a big advantage like the petrol-chemicals.
Has GIC strategised such use of our surplus for our own domestic needs to create jobs for own citizens instead of throwing monies at the Russians or Bangladeshi, Indonesians or Thais causing so much unpleasant political fallouts with our neighbors.
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While Oei can strip assets of the manufacturing businesses that he take a majority stakes in, the Singapore owned Sovereign Wealth Funds have taken only minority share allocation with or without any seat on the Board of Directors, and abstain from involving themselves in the operation of their investments.
According to the information available from the latest Barclays Shares Prospectus to raise approx Stg 4.5 Billion - it seems that it is Temasek Inc that is a shareholder in Barclays and not GIC.
There is also a new company known as China Development Bank said to be from Singapore that has participated with Temasek to buy into Barclays.
Since July 2007, Barclays shares have lost 59% of its value
Despite seeing its share values shrunk, Temasek does not seem to have lost its appetite for more Barclays shares.
AsiaOne reported on 25 June 2008 that Barclays is close to raising Stg 4Billion [S$10.7 Billion] in a capital raising exercise, with existing investor Temasek Holdings likely to be offered more shares. With existing investors such as Singapore’s Temasek and China Development Bank, which are sitting on big paper losses, will be offered the chance to buy into Barclays at a lower price. {See reference Share Issue Prospectus in opening paragraph}
It seems that the Sovereign Wealth Funds are being offered a carrot and got themselves a banana.
The more money that is pumped into these troubled banks, the more they will write down their book values to take care of the bad credit from the sub-prime crisis.
The more capital share issued will require the Sovereign Wealth Funds to either subscribe to more shares, or see their existing percentage holdings shrink despite the huge amounts invested originally.
While MM LKY believe that Sovereign Wealth Funds are in it for the long haul, other more astute Fund Owners are having second thought and wondering if they have made the right decisions - unless MM LKY believe that his financial instincts are more keenly acute than the Qataris and the Chinese in Beijing.
Edited by Atobe 30 Jun `08, 1:42AM
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