GIC Rounds Off Portfolio With Biggest Stock Buy in Eight Years

  • Purchase of stake in utility firm ITC diversifies holdings
  • Biggest acquisition as sole stock buyer since January 2008

GIC Pte’s biggest stock transaction in eight years helps it expand holdings in an industry that it has lagged behind in: Utilities.

GIC on Wednesday said it agreed to pay $1.23 billion in cash to buy 19.9 percent of U.S. power line operator ITC Holdings Corp. from Canada’s largest utility owner Fortis Inc. The transaction is the Singapore sovereign wealth fund’s biggest as the sole buyer of equities since it spent $6.88 billion on Citigroup Inc. securities in January 2008, according to data compiled by Bloomberg.

The state fund, over the last 12 months, bought real estate assets as well as interests in the retail, hospital and health-care industries. The last time it purchased a utilities asset was in 2013, when it led a consortium that acquired Transport et Infrastructures Gaz France SA for 2.4 billion euros, according to the data.

“GIC has been looking to invest in North American infrastructure for a while,” said David Evans, an analyst at the London-based Sovereign Wealth Center. “Infrastructure assets such as this one ideally provide long-term stable cash flows, which is what GIC tends to look for.”

More Utilities

Utilities make up less than $1 billion of GIC’s listed assets, according to data compiled by Bloomberg. That compares with more than $15 billion in financial assets, more than $7 billion in consumer staples and more than $6 billion in information technology, the data show.

Excluding stock deals, the ITC transaction is GIC’s biggest as the sole asset buyer since 2012 when it bought resorts owned by hedge fund Paulson & Co. for $1.5 billion, the data show. Among GIC’s utilities holdings, is a stake in Oncor Electric Delivery Co., the owner of the biggest transmission network in Texas, which it purchased with Canadian investors in 2008.

The transaction allows Fortis, Canada’s largest utility owner, to keep an investment-grade credit rating, according to a statement by the three companies. Fortis agreed in February to buy ITC for $6.9 billion in cash and stock. With Wednesday’s announcement, Fortis has done most of the “heavy lifting” on the financing of the deal, according to Chief Executive Officer Barry Perry.

“We got really comfortable with these guys very quickly,” Perry said in a phone interview on Wednesday. “GIC is a very long-term and thoughtful investor who already own sizable investments in U.S. utilities.”

GIC on Thursday gave Group Chief Investment Officer Lim Chow Kiat the additional title of deputy group president as part of a leadership shuffle appointing seven managers to new roles. The changes, which included the addition of a chief investment officer overseeing infrastructure investments, mark GIC’s first major management change since 2013.

The price meets expectations, enabling Fortis to proceed with a plan to issue $2 billion of debt to complete the ITC takeover, Stacy Nemeroff, an analyst at Bloomberg Intelligence, said by e-mail.

The $1.23 billion that GIC has agreed to pay for its stake represents a discount of about 7.5 percent to ITC’s current market value, according to data compiled by Bloomberg. There were about 100 investors from around the world who expressed initial interest in the asset and finally more than 10 that were “very interested,” Barry said.

The state fund in July reported its annualized real rate of return rose to 4.9 percent in the 20-year period to March 31, 2015, from 4.1 percent in the 20 years that ended in March 2014.

Before it's here, it's on the Bloomberg Terminal.