OCBC in Exclusive Talks to Take Over Hong Kong’s Wing Hang Bank

Jan 06, 2014 11:01 am ET

Jan. 7 (Bloomberg) -- Oversea-Chinese Banking Corp., Southeast Asia’s second-biggest lender, is in exclusive talks for a possible takeover of Hong Kong’s Wing Hang Bank Ltd.

The biggest shareholders of Wing Hang agreed to “engage exclusively” with Singapore-based OCBC through Jan. 31 to finalize terms of a possible offer, the Hong Kong-based family- run lender said in a statement to the city’s exchange yesterday. No financial details were disclosed. Wing Hang has a market value of HK$35.5 billion ($4.6 billion).

Hong Kong’s family-controlled banks, squeezed for years by larger competitors including HSBC Holdings Plc and Bank of China Ltd., are attracting takeover bids as the city’s role in cross- border financing expands. The acquisition size would probably surpass the $2.8 billion OCBC paid in 2001 for Keppel Capital Holdings Ltd., making it the bank’s biggest purchase.

“OCBC’s possible interest here would be to better tap into China’s growth,” Matthew Smith, an analyst at Macquarie Capital Securities Singapore Pte, wrote in an e-mail yesterday. The acquisition will “also build up its renminbi platform given Hong Kong’s position as the world’s main offshore RMB market,” he said.

The Hong Kong bank’s shares posted the biggest intraday slump in almost 20 months yesterday after people familiar with the matter said Jan. 3 that OCBC had offered less than the two times book value Wing Hang was seeking. The lender is currently valued at about 1.7 times its estimated 2013 book value, data compiled by Bloomberg show.

Stock Slump

The stock traded 1.4 percent lower at HK$115.60 at 11:36 a.m. local time yesterday before a trading suspension. It dropped as much as 6.1 percent, the biggest intraday slump since May 2012. The benchmark Hang Seng Index declined as much as 1.1 percent during the day. OCBC fell 1.5 percent to S$9.87 in Singapore, before trading was halted pending its announcement. Both OCBC and Wing Hang will resume trading today.

OCBC has not entered into any binding agreement with the shareholders of Wing Hang, the Singapore-based lender said in a statement to the city’s stock exchange yesterday.

China’s Anbang Insurance Group also made an offer for Wing Hang, said two people familiar with the matter who asked not to be identified. The people didn’t say how much Anbang bid. The offer was non-binding, one of them said. A spokeswoman for Anbang said she couldn’t immediately comment.

Anbang Payment

Beijing-based Anbang indicated it wouldn’t pay more than 1.7 times the book value of Wing Hang, people with knowledge of the matter said last month. Anbang said Jan. 3 it spent 1.43 billion yuan ($236 million) to increase its stake in China Merchants Bank Co. to 7 percent from 6.36 percent.

The family of Wing Hang Chairman Patrick Fung, its affiliates and Bank of New York Mellon Corp. together hold about 45 percent of shares in the Hong Kong lender.

Wing Hang has 70 branches in Hong Kong, Macau and mainland China. Its presence across southern China’s Pearl River Delta makes it a more attractive target than other smaller family- owned banks in the city, Grace Wu, an analyst at Daiwa Capital Markets Hong Kong Ltd., said by phone on Sept. 17.

“OCBC is also very interested to attract mainland wealth management or private banking money, and in a way it might sometimes help you if you have an operation in Hong Kong,” Jim Antos, an analyst at Mizuho Securities Asia Ltd., said by phone from the city yesterday.

Wing Hang is the latest Hong Kong bank to be targeted by a Chinese financial institution. Yue Xiu Group agreed in November to buy a majority stake in Chong Hing Bank Ltd. for $1.5 billion, the first acquisition of a Hong Kong lender since 2009. That year, China Merchants Bank completed a $4.7 billion purchase of Wing Lung Bank Ltd.

--Sanat Vallikappen, with assistance from Aipeng Soo in Beijing. Editors: Darren Boey, Ovais Subhani, Chua Kong Ho