Temasek loses £150m on its July investment in Barclays

Nick Hasell
Times Online
27 Aug 07

Temasek, the Singapore investment vehicle that has emerged as a possible
buyer of Nasdaq’s stake in the London Stock Exchange (LSE), has lost £150
million on its investment in Barclays in the space of a month.

The state-backed fund took a 2.1 per cent interest in the bank in late July
as part of an equity refinancing to support Barclays’s €68 billion (£46
billion) bid for ABN Amro, the Dutch bank.

However, amid the turmoil in the world’s financial markets, shares in
Barclays have fallen by 15 per cent from the price that Temasek agreed to
pay, cutting the value of its holding from £970 million to £820 million.

Barclays closed at 611p last week, coming under fresh pressure on Friday
after the resignation of Edward Cahill, who had run the bank’s
collateralised debt obligations division.
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Temasek paid 720p a share, with a commitment to invest a further £1.5
billion at 740p a share should the proposed merger with ABN Amro proceed.
China Development Bank invested at the same time on the same terms and is
sitting on a £220 million loss on its £1.5 billion stake.

It emerged this weekend that Temasek had expressed interest in the 30 per
cent holding in the LSE being put up for sale by Nasdaq, potentially marking
its first foray into Britain’s financial services sector beyond banks. Aside
from Barclays, it has built a 15 per cent interest in Standard Chartered,
the emerging markets bank.

However, Nasdaq, which has appointed UBS to handle the auction, has said
previously that it would not sell its LSE stake to a single bidder. Under UK
listing rules, ownership of a 30 per cent stake would automatically trigger
a bid for the entire company.

The Nasdaq holding is expected to draw wide interest, with the New York
Stock Exchange, now merged with Euronext Liffe, and Borse Dubai expected to
enter the fray. The governments of Dubai and Singapore regularly compete for
the same assets, most publicly last year in the struggle to buy P&O, the
ports operator, which eventually was won by Dubai Ports World. Deutsche
Börse, which launched a bid for the LSE three years ago at £1.3 billion, is
also seen as a contender.

This month Temasek reported the value of its portfolio as $108 billion.
Since 2002 it has stepped up its plans to diversify its spread of assets,
with a target of allocating one third of its portfolio to Singapore, a third
to the rest of Asia and the remainder to developed countries. At present 78
per cent of its assets are within Asia, including Singapore.

For the 12 months to March 31, Temasek reported a total shareholder return
of 27 per cent. Aside from this month’s setback on its Barclays stake, it
has run into difficulties closer to home. Last year its $3.8 billion
investment in Shin Corporation, of Thailand, the telecoms operator once
owned by Thaksin Shinawatra, the country’s former prime minister and now the
owner of Manchester City Football Club, lost about one third of its value.

Temasek could not be reached for comment.

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