Government Fund Weekly News Roundup — Deal-Making Bonanza Continues

December 11, 2015 by Loch Adamson

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Raffles

This week: The Qatar Investment Authority acquires a stake in French hotel operator Accor. Alaska’s SWF backs the creation of new smart-beta funds. And the Korea Investment Corp. and Singapore’s Temasek Holdings prepare to invest more of their assets in China.

QIA Acquires Accor Stake

Just when you thought it was safe to go back in the water, the M&A sharks are circling again. This week French hotel group Accor gobbled up its Toronto-based competitor, FRHI Hotels & Resorts, in a deal worth $2.9 billion. Accor had its eye on FRHI’s three luxury hotel brands: Fairmont, Raffles and Swissôtel.

As in many of the biggest M&A transactions in 2015 — including the BG-Shell merger and the tie-up between travel retailers Dufry and World Duty Free — the $334 billion Qatar Investment Authority (QIA) played a central role in the deal.

FRHI is co-owned by the QIA and Kingdom Holdings, the Saudi firm controlled by prince Alwaleed bin Talal. Under the terms of the agreement with Accor, QIA and Kingdom will receive a total of $840 million in cash — as well as 46.7 million newly-issued shares in the French firm. QIA will consequently own a 10.5 percent stake in Accor.

Accor’s purchase will enable it to compete with the leviathans of the luxury hotel market, such as Maryland-based Marriott International, which swallowed up rival chain Starwood Hotels & Resorts for $12.2 billion last month.

For its part, QIA will gain valuable access to North America, where Accor owns 42 properties. The Qatari fund usually invests in luxury hotels in Asia, Europe and the U.K., and may have welcomed the opportunity to diversify its portfolio into Canada and the U.S.

Smart Beta

The Alaska Permanent Fund Corp. (APFC) is a long-standing advocate of so-called smart-beta strategies, which involve tilting portfolios to emphasize securities that have specific characteristics. APFC devoted 8 percent of its equities portfolio to smart-beta strategies as of June 2015.

This week, APFC, which oversees Alaska's $52 billion sovereign wealth fund, backed the launch of three new exchange-traded funds (ETFs) by Boston-based State Street Global Advisors (SSGA), the asset management business of State Street Corp. The three ETFs deploy beta strategies to boost returns and reduce volatility. The size of APFC’s commitment was not disclosed.

China Investments

The volatility in Chinese stock markets this year hasn’t dissuaded government funds from investing in the Asian power.

This week Singapore's $194 billion state investor Temasek Holdings and the $215 billion Canada Pension Plan Investment Board reportedly took part in a private share placement by Postal Savings Bank of China (PSBC) ahead of its planned initial public offering on the Hong Kong Stock Exchange in 2016. The Chinese lender placed up to 16.92 percent of its share capital with ten investors, each of whom allocated between $250 million and $500 million, according to local sources. In total, the Chinese lender raised more than $7 billion during the exercise. 

According to the South Korean Ministry of Finance, the Korea Investment Corp., the country’s $84.7 billion sovereign wealth fund, will invest 1 trillion won ($846.8 million) in a new investment vehicle the government has created to support domestic businesses that are active in China. The state-owned Korea Development Bank will contribute an additional KRW 2 trillion to the fund, which will co-invest with Korean firms in various Chinese industry sectors, including manufacturing and infrastructure.


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