DBSDY DBS Group Holdings Ltd (PK)

By P.R. Venkat 

Heavy buying by Singapore companies, such as an $8.1 billion purchase in the U.S. by a consortium including sovereign-wealth fund GIC Pte. Ltd., has sent acquisitions to record highs this year.

Thanks to new opportunities such as firms that have presented themselves as candidates for initial public offerings, Singapore's companies have bought close to $59 billion in assets both domestically and overseas. Buying by GIC and Temasek Holdings Pte. Ltd., the government's two investment firms, accounts for more than a third of the total.

Together, GIC and Temasek have spent close to a record $21 billion, according to figures from Dealogic, a data-tracking company, more than double the $8.9 billion they spent last year. The total is more than the $19.8 billion they spent in 2007, when the state investment companies laid out billions of dollars to acquire stakes in banks such as Barclays PLC, Merrill Lynch and UBS AG.

This time, rather than stakes in Western banks, Singapore's state firms are buying everything from U.S. warehouses to a British car-breakdown service. Other Singapore companies are making deals as well.

Some of the buying is being driven by a return of confidence in mergers and acquisitions, a global trend, but an effort to find assets whose earnings will grow is another driver. Annualized economic growth in this city of 5.4 million people was 2.8% in the third quarter, down from 5% in the same quarter a year earlier.

To that end, companies are looking to China and the West. Buying by GIC, Temasek and many of the companies they own stakes in has accounted for nearly half of this year's M&A by Singapore firms.

"Transactions have been motivated by a number of classic M&A drivers for strategics--pursuit of growth outside of the domestic market to diversify, industry consolidation to drive synergies and build scale, attractive funding environment, and increased strategic focus through divestment of noncore assets," said Eugene Gong, head of Southeast Asia M&A at Deutsche Bank in Singapore.

"Confidence [among Singapore firms] has generally outweighed caution, and companies have become more strategic and long-term-oriented in their outlook," he said.

This year, Temasek and GIC have found investment targets in companies that had been working on IPOs but decided to sell themselves instead. Buying those businesses--or parts of them--represents a shift from a previous strategy of acquiring stakes in companies via IPOs overseas.

On Monday, Virtu Financial LLC, an electronic market-maker that postponed plans for an IPO in April amid market turbulence and increased regulatory scrutiny of high-frequency trading, said Temasek has agreed to buy a stake in it. The 10% stake was worth $200 million, according to people familiar with the matter.

And in a surprise move this month, GIC and Global Logistics Properties Ltd., a warehouse company that counts GIC as its largest shareholder, agreed to buy IndCor Properties, a U.S. warehouse operator that Blackstone Group LP had been planning to sell via an IPO.

The IndCor purchase is one of the biggest by GIC since it bought more than 9% of Citigroup Inc., then reeling from the fallout of the financial crisis, for $6.9 billion in 2008.

In March, Temasek purchased a quarter of Hong Kong tycoon Li Ka-Shing's A.S. Watson Co. for $5.7 billion.

It was the biggest overseas investment yet by the Singapore investment company. The deal positioned Temasek to benefit not only from the cash flow generated by the Hong Kong retailer's drugstores and supermarkets, but also from its drugstore operations in the U.K. and across Europe.

Temasek says consumer-focused companies allow it to benefit as more people enter the middle class, and that such deals are part of its strategy as it shapes its portfolio for the long term.

In September, GIC bought a majority stake in British roadside-assistance provider RAC from Carlyle Group LP, putting to rest a plan by Carlyle to float RAC in London. The RAC deal gave GIC exposure to the British firm's lucrative used-car business.

GIC, which according to analysts manages assets worth close to $300 billion, invests only overseas. Temasek is permitted to invest in Singapore as well. Its portfolio is valued at $179 billion.

"As a long-term value investor, we assess markets over several cycles and pursue idiosyncratic investment opportunities to build a diversified portfolio," Lim Chow Kiat, GIC's chief investment officer, said in an emailed statement.

"We are careful not to overpay for an asset, which is why our investment teams are very focused on determining the intrinsic value of the investment."

Taking advantage of China's growing wealth has also been a priority for Singapore companies.

In July, Overseas Chinese Banking Corp. spent $5 billion to buy Hong Kong-listed Wing Hang Bank Ltd., a move that was intended to increase its exposure to mainland China.

The transaction also gave OCBC a foothold in Macau, the gambling enclave.

In March, DBS Bank Ltd. bought Société Générale SA's Asian private-banking business for $220 million. Temasek owns nearly 29% of DBS Group Holdings Ltd., the bank's parent company.

Write to P.R. Venkat at venkat.pr@wsj.com

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