Companies usually have multiple divisions within their corporate structure, each having its unique characteristics.
This is especially true of large blue-chip conglomerates such as Keppel Corporation Limited (SGX: BN4).
Some of these divisions may contain hidden value as they grow at a faster clip than the rest of the business.
Companies may then choose to spin these divisions off in an IPO to unlock value for shareholders.
Having a separately listed entity also allows it to raise capital and grow on its own terms.
There have been such successful spin-offs in the past, with the most notable being the demerger of Boustead Projects Limited (SGX: AVM) from engineering conglomerate Boustead Singapore Limited (SGX: BSL) back in 2015.
Here are three billion-dollar companies that are considering the same move.
Olam International Ltd (SGX: O32)
Olam is a leading food and agribusiness group that supplies food, ingredients, and feed to its 17,300 customers worldwide.
The company’s comprehensive value chain spans 60 countries and its sourcing network reaches an estimated five million farmers.
In August, Olam announced that one of its operating units, Olam Food Ingredients, or OFI, intends to seek a primary listing on the London Stock Exchange by the first half of 2022.
OFI will also seek a concurrent, secondary listing on the Singapore stock exchange.
Olam went through a corporate reorganisation in early 2020 to create OFI to unlock value for its shareholders.
Meanwhile, the group reported a healthy set of earnings for its fiscal 2021 first half (1H2021), with revenue rising by 33.7% year on year and net profit climbing 26.7% year on year to S$421.5 million.
Olam also released additional information on OFI ahead of its proposed listing.
For the year ended 31 December 2020 (FY2020), OFI generated US$9.1 billion in revenue and US$558 million in operating profit.
It owned 100 manufacturing facilities in 48 countries and employed a total of 15,000 employees.
OFI believes its runway for growth remains significant, with a total addressable market of US$750 billion that is growing at an average of 6% per annum from 2021 to 2025.
ComfortDelGro Corporation Limited (SGX: C52)
ComfortDelGro Corporation Limited, or CDG, is a land transport company with a fleet of more than 40,000 buses, taxis and rental vehicles.
In addition, the group also runs 83 kilometres of light and heavy rail networks in Singapore.
In August, CDG announced that it is pursuing an IPO for its wholly-owned subsidiary, ComfortDelGro Corporation Australia Pty Ltd (CDC), on the Australian stock exchange.
This move is set to unlock the value of its land transport assets in Australia and comes 16 years after CDG first began operations down under.
Over the years, the group has invested a total of S$1.1 billion and for FY2020, CDC generated revenue of S$608 million, close to 19% of the group’s total revenue.
CDG also released information on CDC ahead of its planned listing.
CDC’s wholly-owned bus fleet comprises 2,486 buses and its vehicle asset base is supported by 47 bus depots,
The Australian business will pursue growth initiatives in three areas — growing in regional areas, metropolitan areas, and expansion into other modes of transport.
City Developments Limited (SGX: C09)
City Developments Limited, or CDL, is a global real estate group with operations in 112 locations spanning 29 countries and regions.
CDL’s total assets stood at S$24.5 billion as of 30 June 2021.
Back in June, the group confirmed that it is planning to spin off a REIT with UK commercial properties to be listed on the mainboard of the Singapore stock exchange.
At the time, the size of the portfolio was purportedly around GBP 1.8 billion.
2021 has been marked by a dearth of REIT IPOs on the local bourse and if this listing takes place, it will be the first this year.
This fund-raising exercise will be a welcome relief for CDL as the property giant has been beset with problems this year.
Back in March, it had to make a massive S$1.78 billion impairment on Sincere Property, its Chinese joint venture investment.
The group also reported a loss of S$32.1 million for 1H2021 as its investment properties were hit by lower rental income and it had to dole out reliefs to tenants.
Disclaimer: Royston Yang owns shares of Boustead Singapore Limited and Boustead Projects Limited.