The multinational conglomerate Jardine Matheson announced yesterday that it will purchase a 12.25 percent stake in Cambodia’s Acleda Bank, a move that appears to follow the Hong Kong-based company’s historical pattern of gaining footholds in emerging markets before diversifying investment there.
Jardine Matheson collected $36.2 billion in revenue in 2008, up from $31.6 billion in 2007, and has stakes throughout Asia in a wide variety of operations, including mining, manufacturing, banking, real estate, insurance and luxury hotels. The company, however, reported a 13 percent drop in earnings in the first half of this year compared to last year.
The deal, in which the Dutch government’s Netherlands Development Finance Company (FMO) will sell its stake in Acleda, should be completed by the end of the year, though the value of the transaction has not been disclosed, according a statement from Acleda.
“Jardine is strong in Asia. This will help in the expansion of Acleda. It also brings confidence to the country, financial confidence to banks like Acleda,” bank President In Channy said in an interview. “Jardine Matheson is a long-term investor. They have expertise in banking for more than 170 years. It brings not just capital but brings value added in terms of expertise.”
Acleda Bank, which has more than $900 million in assets, began as a micro-finance organization in 1993 using international development bank investments to grow. It became a commercial bank in 2004 and is now the country’s second largest bank. Acleda Bank is also the first bank in Cambodia to be assigned ratings by Moody’s Investors Service and Standard & Poor’s.
There are now more that 230 Acleda Bank offices and branches in all Cambodian provinces and the bank has 12 offices in Laos where the company expanded in 2008. The bank plans to add at least eight offices in Laos in 2010, said Acleda Bank Vice President John Brinsden.
Mr Brinsden said Acleda plans to keep an eye towards expansion in other countries, such as Vietnam and possibly Burma, which could use the bank’s microfinance and smaller commercial loans.
“This certainly is a step in the commercial evolution of Acleda but it’s doesn’t represent any disruption in strategic business direction. We are still focusing on the same part of the market in micro finance and commercial loans,” he said of Jardine Matheson’s stake in the bank.
Offering his personal opinion based on the Jardine Matheson’s history of investment in emerging markets, Mr Brinsden said “This will be just first step before Jardine launches other investments here.”
Alain Cany, group country chairman of Jardine Matheson Vietnam, said “we believe Acleda offers significant growth potential in a country that has a bright future,” according to a statement.
Jurgen Rigterink, FMO’s chief investment officer, said that Acleda’s plans for further development signaled the right time for FMO to sell.
“We have also provided capacity development support in areas such as corporate governance and risk management that has helped Acleda evolve into a professional organization ready for the next step,” he said in a statement.
Dieter Billmeier, vice president of Canadia Bank, said he expected the deal to raise the profile of Cambodia’s banking sector.
“We consider Acleda to be one of the very good and fair competitors and whatever they can get, it will help the others in the market,” he said, adding that Canadia is also interested in gaining a strategic international investors.
But he pointed out that the deal’s impact on Acleda must be viewed within the context that it already has several international investors.
“For them it’s not a big deal,” he said.
According to the Acleda website those investors include the International Finance Corporation, the private sector arm of the World Bank and Deutsche Investitions-und Entwicklungsgesellschaft, one of Europe’s largest development finance institutions.
Scott Lewis, managing partner and chief investment officer of the private equity fund Leopard Capital, said the arrival of investors like Jardine Matheson and its capital show the evolution of Cambodia’s economy.
But he said only a few companies in Cambodia have the transparency and corporate governance to attract such a major player as Jardine Matheson.
“I think there a handful of companies like this, there is not a long list at the moment,” Mr Lewis said.