3 Singapore Companies That Conducted Acquisitions to Grow Their Business
Companies use a variety of methods to grow their business.
Some rely on organic growth by charging higher prices for their products and services or building a new factory to increase production and sales volume.
Others conduct acquisitions to boost their capabilities or augment certain areas of their business.
Acquisitions can be tricky, though.
Investors need to carefully assess the nature of the acquisition and its merits to determine if it is a good fit for the organisation.
Here are three stocks that recently announced acquisitions to grow their top and bottom lines.
Far East Orchard (SGX: O10)
Far East Orchard, or FEO, is a property company with a lodging platform that seeks to achieve recurring income through the ownership of a diversified portfolio.
FEO is also a member of the Far East Organisation, Singapore’s largest private property developer.
The group announced the acquisition of a 49% stake in Homes for Students (HFS) for £17.6 million.
HFS is the UK’s largest independent purpose-built student accommodation (PBSA) operator and manages 40,000 beds in more than 50 towns and cities in the UK and Ireland.
The agreement could see FEO progressively acquire the remaining 51% of HFS in two stages by September 2025 and November 2030, subject to various terms and conditions.
The management team at HFS will continue to remain in the business throughout the entire duration.
This acquisition will help FEO to propel its FEOR 25 Strategy and help it expand its capabilities while strengthening its position in the PBSA sector.
CEO Alan Tang commented that the purchase will help the group surpass its target of 5,000 beds before 2025.
In addition, strong demand from domestic and international students should support the growth of the UK’s PBSA sector in the coming years.
FEO’s current PBSA portfolio comprises 3,700 beds across key cities in the UK and will increase to around 4,700 beds after the completion of development in Bristol and the acquisition of a Glasgow site in March 2024.
The group also recently announced in its 2023 results that its UK PBSA portfolio maintained high occupancy of 99% for a second consecutive year, underscoring the strong fundamentals of the sector.
Olam Group Ltd (SGX: VC2)
Olam Group is a food and agri-business that supplies food, ingredients, feed and fibre to 22,000 customers around the world.
The group boasts a value chain spanning 60 countries that includes farming, processing, and distribution operations.
Olam Agri, a division of Olam Group, is making an off-market takeover offer for all the shares of Namoi Cotton Ltd (ASX: NAM) at A$0.66 per share.
Namoi Cotton is a cotton enterprise that spans fibre, feed, supply chain, and marketing and employs more than 150 people.
Furthermore, Olam intends to up its offer to A$0.70 per share if it obtains an interest of more than 90% of the Namoi shares before the end of the offer period.
CEO Sunny Verghese commented that Olam Group has operated in Australia as a cotton grower, ginner, and merchant since 2007 and that its experience there will support Namoi and foster its future growth.
CapitaLand India Trust (SGX: CY6U)
CapitaLand India Trust, or CLINT, is an India-based REIT with a portfolio of 10 IT business parks, three industrial facilities, one logistics park, and four data centre developments.
As of 31 March 2024, CLINT’s portfolio value stood at S$3.1 billion.
The India-based REIT has entered into a forward purchase agreement with Phoenix Group to acquire 2.5 million square feet of IT buildings at HITEC City in Hyderabad.
HITEC City is a major IT and office hub where many multinational companies are situated.
This acquisition will bring in an estimated S$4.5 million of pro-forma net profit and help to increase pro-forma distribution per unit from S$0.0645 to S$0.0647.
As part of the deal, CLINT will provide funding of around S$34.7 million to refinance its existing loan while receiving interest on this funding at a rate higher than its borrowing cost.
The REIT will supply further funding when each building is constructed and leased up to 90%.
The manager believes that this purchase is attractive as the capitalisation rate for the properties is higher than the market’s capitalisation rate.
HITEC City is also a preferred location for tenants with CLINT having a well-established presence there with approximately 5.2 million square feet of space enjoying high occupancy.
This transaction will also tap on CLINT’s long-standing partnership with the Phoenix Group which has been in place since 2011.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
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