OCBC in Talks With Billionaire Charoen on United Engineers

Aug 26, 2014 11:16 pm ET

(Updates with OCBC’s capital ratio in fifth paragraph)

Aug. 27 (Bloomberg) -- Oversea-Chinese Banking Corp. and its insurance subsidiary are in exclusive talks to sell their stakes in Singapore’s United Engineers Ltd. and its WBL Corp. unit to Thailand’s richest man.

The discussions started yesterday and will expire six weeks after Thai billionaire Charoen Sirivadhanabhakdi’s TCC Top Enterprise Ltd. begins due diligence on the companies, according to a filing to Singapore’s stock exchange by OCBC and its Great Eastern Holdings Ltd. unit today.

Selling the stake would help OCBC, Southeast Asia’s second- largest lender by assets, bolster capital after its $5 billion takeover of Hong Kong’s Wing Hang Bank Ltd. this year. Companies backed by Charoen have announced $4.5 billion of acquisitions this year, data compiled by Bloomberg show.

“This positive development gives us a hint as to why OCBC’s share offering to help fund the Wing Hang Bank acquisition was on the extreme low side of expectations,” said Jim Antos, a Hong Kong-based analyst at Mizuho Securities Asia Ltd. with a buy rating on the Singaporean lender. “OCBC and Great Eastern will likely book gains on the sale of their United Engineers and WBL stakes, and this will take some pressure off of capital ratios.”

OCBC said Aug. 18 it plans to raise S$3.37 billion ($2.7 billion) from selling stock to existing shareholders to bolster its balance sheet following the Wing Hang purchase. The Singaporean bank said that day its common equity Tier 1 capital adequacy ratio, a measure of financial strength under Basel III guidelines, will fall to 13.2 percent following the acquisition and the rights offer, from 14.7 percent before the takeover.

Triggering Takeover

Shares of OCBC rose 0.2 percent to S$10.05 as of 11:10 a.m. Singapore time. Great Eastern has yet to trade today. United Engineers climbed 2.5 percent to S$2.83, pushing the company’s market value to S$1.8 billion. The stock surged 58 percent this year.

OCBC, its insurance unit and the bank’s founding Lee family own a combined 34.1 percent stake in United Engineers, according to a filing in August last year. Buying more than a 30 percent stake would trigger a mandatory takeover offer for United Engineers under Singapore rules.

In 2012, OCBC entered talks to sell its holdings in Fraser & Neave Ltd. and Asia Pacific Breweries Ltd. to Charoen’s Thai Beverage Pcl. That touched off a three-front bidding war for the two companies, with Heineken NV eventually buying Asia Pacific Breweries and Charoen beating out OUE Ltd. for Fraser & Neave in deals that totaled $15 billion, data compiled by Bloomberg show.

Charoen is Thailand’s richest person with a net worth estimated at $12.4 billion, according to Bloomberg Billionaires Index. He controls an empire whose businesses span industries from beer to property development.

United Engineers, which bought Singapore-based builder WBL last year for $725 million including debt, was founded in 1912 as an engineering company that helped build Singapore’s Shangri- La hotel and historic Supreme Court.

--With assistance from Joyce Koh in Singapore.