Sick Thoughts – Temasek Times The Market Top ?

Here I am making myself more ill than I already am, on a Sunday with flu like symptoms, by re-reading my 20 year old copy of The Hot Zone by Richard Preston and about putrefied remains of Ebola victims, essentially reduced to puddles as they virtually melt away from the inside.

The recent epidemic in Guinea would probably be the Ebola Zaire strain, with the 90% fatality rate and one painful, tortured death. In my fevered thoughts, I wondered if one would feel anything during death given the brain dies a day or two before the heart dissolves itself.

Morbid thoughts which I decided to banish by reading up on market developments and lo and behold, what did I find ?

Temasek’s recent offer for Olam is pretty significant indeed for it is the largest ever acquisition made by Temasek, it seems.

At USD 9.4 billion (SGD 11.896 bio), Olam would put PSA (SGD 9.265 bio)  and Singapore Power (SGD 8.464 bio) in its pocket. The transaction value is computed as Market Cap SGD 4.018 bio + Net Debt SGD 7.877 bio.

I went through the history of Temasek’s acquisitions and noticed they only buy during boom years.

And they are not the only ones.

If we examine the top M&A deals that are pending at the moment, we notice some sizeable deals in the making, especially in the first quarter of 2014, with the stock market at its all time high and buyers paying larger than ever premiums for their targets.

Remember what I said about Temasek in my piece, Random Thoughts : Temasek, Olam and Watsons – When It is So Dumb, It Must Be Smart ?

The answer is that it is because you will only find sellers at the market top ! And long term buyers can only buy the good stuff at the high.

No blue chip would be selling out their company at the lows !

And look at the trend this year – M&A volumes have doubled from 4Q13 to a new record. 513 bio is a big number because the world just got used to the word billions about 6 years ago when QE started.

If we look back on the last biggest transactions of Temasek, it would be Merrill Lynch for USD 4.4  bio back in Dec 2007 at USD 51.99 per share. Within 9 months, Merrill was acquired by Bank of America for USD 11.64 per share.

This is not a critique of Temasek’s investment paradigm but rather, a stroke of genius of an observation that only a flu riddled being, reading about Ebola, can conceive.

Don’t thank me, just wish this flu away.