Breakingviews – Jardine’s restructuring could attract a campaigner

HONG KONG (Reuters Breakingviews) – Jardine Matheson’s restructuring sends mixed signals to brutal investors. The 189-year-old group is dismantling a structure that has protected the descendants of founder William Jardine for decades. Doing this reduces the conglomerate reduction, but also shows a willingness to change.

The largest of the two property companies is buying the 15% stake in its sister Jardine Strategic for $ 5.5 billion. It releases a transmission frame created in the 1980s to deter physical predators. The Keswick family will eventually own 43% of Jardine Matheson, who controls Hongkong Land developer, retailer of Dairy Farm International, Mandarin Oriental hotels and Jardine Cycle & Vehicle with a Southeast Asian focus.

This major step suggests less risk from outsiders. Market response also helps. The four public trade companies have a total commitment of $ 17 billion. Two smaller holdings in Zhongsheng and Greatview Aseptic Packaging are now worth $ 3 billion combined. Adding unregistered Jardine Pacific and Jardine International Motors each on multiple 12-hour CLSA employment projections adds another $ 4 billion. Return corporate cash and the net realizable asset value is approximately $ 22 billion, or just a 10% discount on the post-contract valuation. Previously, it was closer to 25%.

That narrowing could stop calls for major changes. Peer Swire Pacific trades at a 50% discount to net asset value, according to Citigroup analysts, but is also protected by a two-class division structure. There are other reasons to focus on Jardine, however.

For one thing, the merged entity is already a collection of non-profit assets. There is a construction company, an airport ground handling unit and a joint venture with Schindler Lifts. A British car dealer who loses money is next to his cousin in Hong Kong. There is also a creep of intent between units, such as Pizza Hut franchises in one place and Starbucks in another. Each one looks small on its own, but a wider cleaning would be put up. Some $ 2.9 billion of securities, including Toyota Motor and Rothschild, also deserve reconsideration.

Since Jardine finally embarked on an investor campaign two decades ago – when Brandes insisted on the same restructuring announced last week – he has been extremely cautious. The management of the company has made it clear that there are no other major changes. An aggressive hedge fund may have other ideas.