Jardine Matheson Holdings (JMH) has just announced it is planning to take 85%-owned subsidiary Jardine Strategic Holdings (JSH) private, at US$33 ($44.38) in cash per share. The US$5.5 billion buyout deal represents a 32.3% discount to its last announced NAV of US$48.71, which is the sum of its investments in JMH, Dairy Farm International, Hongkong Land, Mandarin Oriental and Jardine Cycle & Carriage (Jardine C&C).

In an analyst briefing on March 8, JMH’s management said the price is at a premium to JSH’s last done price before the announcement, its volume weighted average price for the week, and month before the announcement. The offer price is also a premium to the highest price within the past year. The privatisation will be implemented via an amalgamation under Bermuda Law which requires 75% of JSH’s shareholders to vote in favour. “We will vote our 85% shareholding in favour of the resolution so it’s certain to be approved,” says John Witt, managing director of JMH. Once the amalgamation is approved by shareholders in the EGM to be held in April, the acquisition will take place within four days.

However, given JSH’s NAV as of end 2019 and end 2018 was $57.98 and $68.46 respectively, using premium to NAV may not be the only or best way to value JSH. Indeed, the buyout deal makes sense as it streamlines and simplifies the sprawling group’s cross-holdings. JSH holds 78% of Dairy Farm and 78% of Mandarin Oriental, 75% of Jardine C&C, and 50% Hongkong Land. Following the acquisition of JSH, JMH would hold these directly and the cross-holding of JSH’s 59% in JMH will be cancelled.

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