Temasek reconsiders STAN stake (IPOs and Deals)

Temasek has sounded out potential buyers for its £6bn stake in STAN, potentially reigniting talk of a takeover of the EMs bank. It had been judging buyer interest for its 18% shareholding in recent months. Bankers said earlier momentum for a sale fell last month as STAN’s shares dropped 20% on the day it was accused by a US regulator of breaching US sanctions on Iran. After settling the dispute with a $340m payment, the bank’s share price has rebounded. Temasek became STAN’s biggest single shareholder six years ago, buying out the 11.5% stake of the Khoo family for a small undisclosed discount to its then market value of £2.3bn. The family had been the bank’s protector since the 1980s, when it had become the subject of an unwelcome bid from Lloyds Bank. STAN is one of the few globally active banks to be largely unscathed by GFC. It has attracted interest from the likes of JPM and Santander, according to bankers. Although private discussions have taken place, nothing has come of them, largely because STAN’s robust valuation – its market capitalization is £35bn – would make it hard to swallow.

STAN trades at a 1.4X BV at a time when many rivals, particularly in Europe, trade on less than half that. Analysts said Temasek might be keen to take advantage of the relative strength and reduce its exposure to financial services, given the economic uncertainty. Bankers believe any ambition Temasek might have had to engineer a merger between STAN and another of its investments, DBS, has faded, given the complexities and regulatory hostility to big banking mergers. Temasek has hired two western bankers – Greg Curl from BAML and John Cryan, former FD of UBS – to help oversee its stakes in businesses in the US and Europe. People close to the situation stressed that there were no live discussions with any potential buyer. Temasek signaled a move away from its STAN stake a year ago when it issued an innovative CB that would convert into STAN shares under some circumstances. The three-year bond, which raised more than $600m, would potentially shave nearly 1 percentage point off the fund’s total stake if the bank’s shares rise beyond the prerequisite 27% premium to the then share price of £14.29. The shares closed on Monday at £14.81. After the row over sanctions, the bank promised a shake-up of its board, which was criticized by shareholders earlier in the year. Temasek withheld support for the re-election of EDs except CEO Peter Sands and two non-executives.