Temasek Goes for Another Prize

The next big acquisition by Singapore’s giant sovereign wealth fund, Temasek Holdings, is understood to be a 20-percent stake in the privately controlled Zuellig group, a low-profile but very successful pharmaceutical distributor — the largest in Southeast Asia, say Singapore-based corporate sources.

Zuellig, founded in 1916, is owned by a Swiss family but has always been Asia-based, originally as a general trading company in the Philippines but expanding, particularly in highly profitable niche of pharmaceutical distribution to many Asian countries, including Singapore, Thailand, Indonesia, Malaysia, Hong Kong and, more recently, China. Its Asian headquarters are in Hong Kong.

On November 5, the China Daily reported that Zuellig, which already has a pharmaceutical distribution network on the mainland, was intending to branch out into health clinics, providing services to the public as well as acting as agent for major — mostly western — pharmaceutical companies.

Zuellig is a tightly held family business, but investment bankers suggest that it is unlikely to remain so. Its controlling shareholders are two Zuellig brothers in their late 80s. They have several children but none in top management and ownership is likely to be dispersed. By taking a strategic stake now, Temasek will be in a strong position to assume control in the future.

Zuellig also has insurance and feedmill interests, the latter through Malaysia-based and listed Gold Coin. But the core of its business is pharmaceuticals, which would fit well with Singapore’s ambitions to develop into a bio-tech centre as well as expand its already significant interests in hospital and health care facilities around the region.

The size of the expected deal cannot be estimated but a 20-percent stake could be worth as much as US$1 billion given that Zuellig has a turnover of some US$5 billion a year.