Government Fund Weekly News Roundup: Temasek Backs Blockbuster Tech Buyout

October 16, 2015 by Loch Adamson

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Michael Dell. Photograph courtesy of Hartmann Studios

Temasek Holdings backed Dell’s proposed takeover of data storage company EMC this week — a deal that promises to be the largest in the history of the technology sector. In other news, SWFs line up big real estate investments and oil funds face withdrawals from cash-strapped governments.

History’s Biggest Tech Deal

Temasek Holdings is no stranger to multi-billion dollar private equity transactions. But even by Singaporean standards, this was a big deal.

News emerged this week that Temasek has agreed to help finance U.S. technology giant Dell’s proposed buyout of Hopkinton, Massachusetts-based data storage company EMC for an eye-watering $63 billion. Dell enlisted the backing of Temasek and Menlo Park, California-based private equity firm Silver Lake Partners, which together contributed around $4 billion in equity. Dell also procured a further $40 billion in bank loans to finance the takeover — which promises to be the largest technology transaction in the history of the sector.

Temasek and Michael Dell, founder and CEO of the eponymous computer giant, have a long-standing relationship. The $194 billion state investor reportedly backed Dell in 2013 when he took the company private at a cost of $25 billion, ostensibly to retain personal control of the firm as activist investors circled.

EMC has been losing market share to cloud storage based systems in recent years, although it retains strong cash flows. Temasek’s support for the buyout suggests it has faith that Dell will be able to turn the company around.

Real Estate Deals

Government funds continue to plow billions into global real estate markets. Two unnamed sovereign wealth funds — which the Sovereign Wealth Center believes to be the $621 billion Abu Dhabi Investment Authority (ADIA) and Singapore’s $343 billion GIC — teamed up with Brookfield Property Partners, a unit of Toronto-based Brookfield Asset Management, to purchase a real estate portfolio located on Potsdamer Platz in central Berlin for €1.3 billion ($1.5 billion) this week.

A joint venture between Montreal-based Ivanhoé Cambridge, the real estate unit of $195 billion Canadian pension fund Caisse de Dépôt et Placement du Québec, and London-based property manager Residential Land bought two luxury apartment buildings in the U.K. capital for a combined £160 million ($245.8 million).

Beyond Europe, Norges Bank Investment Management (NBIM), the arm of the central bank that manages Norway’s $830 billion sovereign wealth fund Government Pension Fund Global (GPFG), and CapitaLand, a Singaporean real estate developer part-owned by Temasek, are reportedly close to buying Asia Square Tower 1, a 42-storey office building in Singapore’s business district. The seller, New York-based investment giant BlackRock, is believed to have chosen NBIM and CapitaLand as its preferred bidders for the asset, which could fetch as much as S$3.5 billion ($2.5 billion).

SWF Raids

SWFs’ appetite for big real estate deals may be more constrained in the future, as the crash in energy prices tempts oil-dependent economies into raiding their sovereign wealth funds to finance budget deficits.

Indeed, there is evidence that oil funds are already starting to change their strategies to bolster their balance sheets. Three of the largest oil-fueled sovereign wealth funds — ADIA, GPFG and the Saudi Arabian Monetary Agency’s $235 billion investment portfolio — sold a collective $2.5 billion worth of European stocks over the first six months of the year, according to new research from Nasdaq Advisory Services, a subsidiary of the eponymous stock exchange group.

Kuwait has reportedly begun to tap its fund. The $592 billion Kuwait Investment Authority is prepared to withdraw up to $30 billion from the two sovereign wealth funds it manages to plug a hole in the government’s budget, according to reports in the local press.

And it’s not just oil funds feeling the pinch — diamond rich Botswana is also prepared to tap its sovereign wealth fund, the $5.7 billion Pula Fund. President Ian Khama said his government is readying an economic stimulus package that will involve spending a portion of the country's $8.7 billion foreign exchange reserves, most of which is held on the Pula Fund’s balance sheet. Botswana has been hit by the decline in demand for diamonds, its most lucrative export.

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