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July 21, 2016

Temasek offers $1.89bn to acquire Singapore’s SMRT

Temasek's subsidiary Belford Investments has reached an agreement to acquire Singapore's public transport operator SMRT Corporation.

Temasek's subsidiary Belford Investments has reached an agreement to acquire Singapore's public transport operator SMRT Corporation.

Belford will pay $S1.68 ($1.24) per share in a transaction valuing SMRT at $S2.57bn ($1.89bn). Upon completion of the acquisition, SMRT will become a wholly-owned subsidiary of Temasek.

This will allow it to focus on its primary role of delivering safe and high-quality rail service without the short-term pressures involved of being a listed company. However, SMRT will need further investments to fulfil its role as a public transport operator.

Temasek's international president Chia Song Hwee said: “Today, we are proposing to move SMRT to private ownership so we can more closely collaborate with the company on system level transformation, including its transition to the new regulatory environment without the distraction of being a listed company.

"While the acquisition will allow it to focus on the delivery of rail services, SMRT will need further investments to fulfil its role as a public transport operator."

"We will have greater flexibility to work with SMRT as a private entity to seek sustainable long-term solutions as part of its transition.

“This privatisation Scheme will allow the minority shareholders to monetise their holdings in SMRT to avoid the uncertainties of the transition.”

Singapore’s Land Transport Authority (LTA) has recently agreed to acquire SMRT's rail assets through the government’s New Rail Financing Framework (NRFF). The ownership of respective operating assets of SMRT Trains and SMRT Light-Rail such as the trains and signalling system will initially be transferred to LTA.

SMRT's chairman Koh Yong Guan said: “We welcome the transition to the New Rail Financing Framework, which is an improvement on the current framework. However, the company will continue to face significant risks.

"We do not have any control over fare increases and ridership growth – two key revenue drivers for SMRT Trains.

“At the same time, SMRT will continue to face significant risks over operating costs as we will be faced with challenges in the regulatory environment with costs and uncertainties associated with an ageing and expanded network, and to deliver higher rail reliability and service.”

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