Last week, Keppel Corporation Limited (SGX: BN4) announced the acquisition of an initial 50% stake in European asset manager Aermont Capital.
Aermont will become Keppel’s European real estate platform and provide a springboard for the group to gain a strong foothold in the region.
The acquisition of the remaining 50% stake will take place five years later in 2028.
Keppel will fork out up to S$517 million for this stake which will be funded via a combination of cash and treasury shares.
This transaction is expected to be completed in the first half of 2024 (1H 2024) and will be immediately accretive to the blue-chip group’s earnings per share.
Here are five things investors need to know about this purchase.
1. Increase its funds under management (FUM)
As of 30 June 2023, Aermont had total funds under management (FUM) of S$24 billion spread across four active funds and a single asset vehicle.
With the acquisition, Keppel’s FUM will increase from its current S$53 billion to S$77 billion, bringing it closer to achieving the group’s target of S$100 billion in FUM by 2026.
Management believes that there is the potential to further grow Aermont’s FUM to around S$60 billion by 2030 as both parties work together on joint initiatives.
If successful, this will add another S$36 billion of FUM to the Keppel group.
These initiatives include the co-creation of European credit funds, data centres funds, and private investment vehicles.
Other possibilities include evergreen funds, single investment vehicles, or even REITs.
2. Expanding Keppel’s footprint and talent pool
This acquisition also helps to expand Keppel’s geographic footprint beyond Asia Pacific and into Europe.
Aermont’s extensive geographic presence in Europe and its investment strategies will complement Keppel’s with minimal overlap.
The purchase will also bolster Keppel’s talent pool by bringing in an experienced senior team with a proven track record and extensive networks within Europe.
Aermont boasts best-in-class management professionals including six partners, 22 investment team professionals, and a diverse team with 13 nationalities.
3. Access to blue-chip limited partners (LPs)
Both parties will benefit from this synergistic acquisition by gaining access to a wider pool of LPs.
Aermont has access to more than 50 global blue-chip LPs such as public pension funds, sovereign wealth funds (SWFs), endowments, and foundations.
The bulk of these LPs is in Asia and the US with the remainder in Europe and the Middle East.
Around 90% of the LPs comprise pension funds and SWFs, with eight of the 15 largest LPs being new to Keppel.
A large LP is defined as one that has invested or committed more than €100 million.
4. A high-quality independent asset manager
Aermont was established in 2007 and is an independent asset manager focused on real estate and real estate investment activities in Europe.
The firm is a leader in opportunistic real estate investments and was ranked the highest among Europe-based real estate funds in terms of funds raised in the past five years.
Aermont has a total of five pan-European opportunistic funds of which one (Fund I) has been fully realised and liquidated.
The remaining four have raised total equity of €8.6 billion with Funds II and III having a projected net internal rate of return (IRR) of 13% and 32%, respectively.
According to Leon Bressler, chairman of Aermont Capital, the composite net IRR since the creation of the firm is an impressive 17% IRR.
Aermont also has a PGV single-asset fund that has raised £3 billion.
Its investments have included assets and businesses in the office, student accommodation, workforce housing, luxury hospitality, and production studio infrastructure sectors, among others.
To date, Aermont has generated a 2.8 times gross multiple on the capital invested.
5. Attractive financial effects
When completed, this acquisition looks set to bolster Keppel’s recurring income and FUM.
Earnings per share for 2022 will rise from S$0.521 to S$0.524.
Recurring income, comprising asset management income and operating income, will rise by 1.8% from S$503 million to S$512 million.
Also, for 2022, net tangible asset per share will improve slightly from S$5.49 to S$5.50.
Keppel’s net gearing will only increase by approximately one percentage point on a pro forma basis.
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Disclosure: Royston Yang does not own shares in any of the companies mentioned.
