Jardines returns to banking with Rothschild stake

Deal reunites groups in a relationship that dates back to the days of Empire

Jardine Strategic Holdings will pay US$185 million for a 20 per cent stake in the parent company of NM Rothschild & Sons, in a deal that reunites the hong with its 19th century European peer and marks Jardines' return to the investment banking sphere after a seven-year absence.

Jardines Strategic is buying the interest in Rothschild Continuation Holdings (RCH) from British insurer Royal & Sun Alliance, which has been a passive investor in the Rothschild family's investment banking arm since 1980.

It is one of two Singapore-listed holding firms, alongside Jardine Matheson Holdings, through which the Britain-based Keswick family controls an Asian business empire encompassing Hongkong Land Holdings, Mandarin Oriental International, Dairy Farm and Jardine Cycle & Carriage.

Jardine Matheson left a 28-year investment bank venture with Robert Fleming in 1998. Two years later it sold a residual 13 per cent stake in Robert Fleming to Chase Manhattan for a US$1.03 billion gain.

Jardine Strategic will appoint two executives to RCH's board but will not take an active role in Rothschild's operations. 'They will be a shareholder but not involved in management,' RCH chairman David de Rothschild said, adding: 'The [Rothschild and Keswick] families have been friendly for many, many years.'

In a statement, Jardine Matheson Group chairman Henry Keswick welcomed the reunion of the two firms, whose relationship dates back to the early 19th century. 'In making this strategic investment our group is renewing a relationship that began in 1838 when we first acted as agents for Rothschild in China,' Mr Keswick said.

Andrew Rickards, the head of Asian investment banking for NM Rothschild, and Jardine Matheson company secretary Neil McNamara both pointed to Jardines' experience and extensive networks in Asia, where NM Rothschild is trying to build up its financial advisory business. 'Jardines' biggest impact will be in Asia,' Mr Rickards said.

According to Bloomberg data, the niche investment bank ranked 16th in M&A advisory work in Asia last year. But its regional client list is growing, most notably in China, where it is advising CNOOC on a US$20 billion spoiler bid for California-based Unocal Corp and Shanghai Automotive Industry Corp on its Hong Kong offer.

While Jardines' focus remains in Hong Kong and southern China, it moved its stock listings to Singapore from Hong Kong before China resumed sovereignty in 1997. The company makes little effort to hide its colonial heritage - the telephone system at its Hong Kong headquarters treats callers to Scottish bagpipe music when they are put on hold.

It also has a politically incorrect mainland past - its involvement in the 19th century opium trade and Mr Keswick has previously criticised the Beijing leadership.

'There might have been some tensions there but I think it's past history now,' Mr Rothschild said.

Jardine Strategic's shares fell 1.9 per cent to S$10.30 yesterday ($47.87), but remain up more than 25 per cent on the year.