Keppel Corporation Limited (Keppel) has entered into an agreement with Aermont Capital Group SCSp to acquire an initial 50% stake in leading European real estate manager, Aermont Capital (Aermont). This marks a pivotal step in Keppel’s transformation to be a global asset manager and operator, giving the Company a strong foothold in Europe and significantly expanding its presence beyond Asia Pacific.
The consideration of up to S$517 million[2] for the initial 50% stake in Aermont, which can be funded through a combination of cash and treasury shares acquired through Keppel’s earlier share buyback programme, implies an attractive valuation of c.13x EV/EBITDA. The acquisition of the initial 50% stake in Aermont is expected to be completed in 1H 2024, subject to identified regulatory and other approvals. On completion, the transaction is expected to be immediately earnings accretive to Keppel. It will bolster Keppel’s recurring income and FUM, which is projected to grow to over S$77 billion from the current S$53 billion[1] , with an approximate one percentage point impact to the Company’s net gearing on a pro forma basis[3].
Established in 2007, Aermont is an independent asset management business focused on real estate and real estate-related investment activities in Europe. It is a leader in opportunistic real estate investments with a proactive operator-oriented approach emphasising prime assets and leading businesses across core Western European markets. In 2023, PERE ranked Aermont the highest among Europe-based real estate firms in terms of funds raised in the last five years.
As at 30 June 2023, Aermont had a total FUM of S$24 billion across four active funds and a single asset vehicle, of which approximately S$10 billion in equity commitments were raised in 2022, reflecting the strong support from Aermont’s LPs. Aermont’s investments have included assets and businesses in the office, student accommodation, workforce housing, luxury hospitality and production studio infrastructure sectors, among others. Through its funds, Aermont has generated an average realised 25% gross internal rate of return and 2.8x gross multiple on invested capital to date.
Mr Loh Chin Hua, CEO of Keppel Corporation, said, “Aermont Capital runs an established and highly successful asset management platform in Europe, raising the most capital among European real estate funds in the last five years, despite the COVID-19 pandemic. The acquisition of an initial 50% stake in Aermont, with a pathway to an eventual 100% ownership and full integration, marks a major strategic step forward in Keppel’s ambition to be a global asset manager and operator, availing us of a highly attractive European platform with strong recurring fees and a premium network of global LPs.
“We are very pleased to welcome Aermont Capital and its experienced team, helmed by its Chairman, Mr Léon Bressler and Managing Partner, Mr Paul Golding, who together with their partners, have built a top performing and impressive franchise in Aermont that has attracted some of the world’s most prominent LPs. Aermont’s operating culture is very similar to Keppel’s, with a strong emphasis on value adding and active management, while their opportunistic strategy is a good complement to our core and value add investment approach. Keppel looks forward to the partnership and is committed to support and build on the culture that has made Aermont successful, as we add value to each other by harnessing our collective expertise for growth.”
Mr Léon Bressler, Chairman of Aermont Capital, said, “We are looking forward to building a close partnership between Keppel and Aermont. Keppel offers something specific and compelling to our franchise; its technical and operating expertise are well-aligned to key megatrends such as the energy transition, digital transformation and urbanisation. For Aermont, access to that expertise will help us better capitalise on a number of technology-driven opportunities. It will also open the door to new fund strategies, enabling us to eventually offer more to our LPs and to broaden the professional opportunity to our team. Moreover, we will continue building on Aermont’s unique culture rooted in operational expertise, deep value creation and an LP-first approach, all of which Keppel shares. Teaming up with Keppel today therefore makes us stronger, more capable and better positioned, which will be to the benefit all Aermont stakeholders.”
Highly synergistic acquisition
This transaction presents a unique and strategic opportunity for Keppel to acquire a leading European real estate manager at an attractive valuation:
Following the acquisition of the initial 50% stake, Keppel will focus on maintaining and supporting the success of Aermont’s real estate platform while working with Aermont’s team to jointly develop new fund products and initiatives, leveraging Keppel’s expertise in alternative assets such as private credit funds and data centres.
After that transition period, Keppel expects to proceed in 2028 to acquire the remaining 50% stake in Aermont subject to identified regulatory approvals. The performance-based deal structure, which can be funded through a mix of cash and treasury shares, will help achieve greater alignment between the interests of Aermont’s and Keppel’s interests over the long term.
Pro forma financial impact of the initial 50% stake acquisition[4],[5]
For illustrative purposes only, based on the Group’s audited results for the full year ended 31 December 2022 (FY 2022):
(a) had the acquisition been effective on 1 January 2022, the earnings per share for FY 2022 would have increased from 52.1 cents to 52.4 cents;
(b) had the acquisition been effective on 1 January 2022, the Group’s recurring income[6] for FY 2022 would have increased from S$503 million to S$512 million; and
(c) had the acquisition been effective on 31 December 2022, the net tangible assets per share as at 31 December 2022 would have increased from S$5.49 to S$5.50.
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[1] Gross asset value of investments and uninvested capital commitments on a leveraged basis to project fully-invested FUM as at 30 June 2023.
[2] Based on an exchange rate of €1 : S$1.45.
[3] Assuming up to EUR 154 million of the Phase 1 consideration is funded in Keppel treasury shares with the remainder in cash, and calculated on a pro forma basis assuming the acquisition of the 50% stake was completed on 31 December 2022.
[4] Assuming up to EUR 154 million of the Phase 1 consideration is funded in Keppel treasury shares with the remainder in cash, and calculated on a pro forma basis assuming the acquisition of the 50% stake was completed on 31 December 2022.
[5] The potential impact of purchase price allocation under Singapore Financial Reporting Standard (International) 3 Business Combinations has not been taken into account.
[6] Recurring income comprises asset management income and operating income.
About Keppel
Keppel Corporation (SGX:BN4) is a global asset manager and operator with strong expertise in sustainability-related solutions spanning the areas of infrastructure, real estate and connectivity. Headquartered in Singapore, Keppel operates in more than 20 countries worldwide, providing critical infrastructure and services for renewables, clean energy, decarbonisation, sustainable urban renewal and digital connectivity. Keppel creates value for investors and stakeholders through its quality investment platforms and diverse asset portfolios, including private funds and listed real estate and business trusts.