OCBC Shares Climb as $5 Billion Wing Hang Takeover Succeeds

Jul 29, 2014 10:50 pm ET

(Updates with deal funding in 11th paragraph.)

July 30 (Bloomberg) -- Oversea-Chinese Banking Corp. shares climbed the most in three months as it prepares to take Hong Kong’s Wing Hang Bank Ltd. private after shareholders accepted its $5 billion takeover offer.

OCBC will delist Wing Hang after raising its ownership to 97.52 percent, the two lenders said in statements to the Singapore and Hong Kong exchanges yesterday, the last day of the offer. Hong Kong’s takeover rules required OCBC, Southeast Asia’s second-largest lender, to own at least 90 percent of Wing Hang’s shares before the target could be delisted.

OCBC is buying Wing Hang as it seeks more access to the Greater China region, allowing it to offer banking services to Chinese companies expanding in Southeast Asia. Samuel Tsien, the acquirer’s CEO, said earlier this month his bank intends to tap the owners of Wing Hang’s corporate clients, mainly small and medium-sized companies, for the Singaporean lender’s private- banking business.

“The urgent need will be to determine a sustainable strategy in such a competitive market, including being clear quickly on what business segments and areas to focus on,” Kevin Kwek, a Sanford C. Bernstein & Co. analyst based in Singapore, wrote in a note to clients yesterday. “There is pressure for management to show the deal is worth it.”

Shares of OCBC rose 1.6 percent to S$9.92 as of 10:32 a.m. in Singapore, the biggest intraday gain since April 30. Wing Hang was suspended today in Hong Kong, where the stock closed at HK$121.80 yesterday.

Bid Pressure

Acceptances for the bid dragged earlier this month as hedge fund Elliott Capital Advisors LP boosted its stake in Wing Hang to 7.8 percent, which Mizuho Securities Asia Ltd. said at the time could put pressure on OCBC to raise its HK$125 ($16) per- share bid price.

OCBC said through its deal advisers on July 15 it wouldn’t raise its offer. Its stake in Wing Hang climbed in the past week as Aberdeen Asset Management Plc, the Hong Kong lender’s third- biggest shareholder, joined Bank of New York Mellon Corp. and the family of Wing Hang Chairman Patrick Fung in accepting the bid.

The buyer’s current ownership level indicates Elliott Capital tendered at least a part of the shares it held. Richard Barton, managing partner at Newgate Communications in Hong Kong, declined to comment on behalf of Elliott.

Wing Hang will become an OCBC subsidiary after the compulsory acquisition of the Hong Kong bank’s remaining shares, the lenders said yesterday.

Equity Funding

“Integrating the operations and businesses of Wing Hang Bank with OCBC will now pick up speed,” OCBC’s CEO Tsien said in a separate statement.

The takeover will be funded with equity and debt, Tsien said in a July 10 interview, without indicating the proportion of each as the bank wasn’t sure of the stake it would obtain.

OCBC can partly fund the purchase through a S$3 billion ($2.4 billion) rights issue, Anand Swaminathan, a Singapore- based analyst at Credit Suisse Group AG, wrote in a note yesterday. That can dilute earnings per share by 1 percent to 3 percent, he said.

Takeover speculation helped drive Wing Hang shares up by 69 percent in the past year. The Hong Kong bank’s shares traded as high as HK$127 on July 7 after Elliott Capital said in a July 3 filing it had paid HK$125 a share -- the same as OCBC’s offer price -- to increase its stake.

Yuan Business

Wing Hang gives OCBC a network of about 70 branches spanning Hong Kong, Macau and mainland China.

Hong Kong lenders are luring foreign buyers seeking to tap China-related business in a city that is the biggest center for offshore yuan trading. Outstanding loans in Hong Kong made in China’s currency surged 46 percent last year to 115.6 billion yuan ($18.7 billion), Hong Kong Monetary Authority data show.

The Wing Hang bid is the largest takeover of a Hong Kong bank since DBS Group Holdings Ltd., OCBC’s biggest competitor in Singapore, offered $5.4 billion for Dao Heng Bank Group Ltd. in April 2001. Yue Xiu Group, controlled by the Guangzhou city government in southern China, completed in February a $1.5 billion purchase of a majority stake in Chong Hing Bank Ltd.

--With assistance from Bei Hu in Hong Kong.