Through its wholly-owned subsidiary OCBC Pearl, the bank intends to buy Wing Hang Bank at an offer price of HK$125 per share or a total of HK$38.4bn (approximately S$6.2bn, $5bn, £3bn) in cash.
The bank said the deal will further establish it as a “leading, well-diversified Asian financial services group with a broad geographical footprint in North and South East Asia”. It also said customers will benefit from a wider selection of products and services, while gaining access to Wing Hang’s broader network of 70 branches in Hong Kong, Macau and China.
Samuel Tsien, chief executive of OCBC Bank said: “Wing Hang is a solid franchise with distinctive product capabilities, an impressive network and strong customer base. It is a strategic component of our Greater China strategy.
“Without the opportunity presented by this potential acquisition, I would expect OCBC to take a much longer period of time, and encounter greater challenges with less certainty of success, before we can fully benefit from continuing internationalization of the renminbi and other developments in Greater China.”
OCBC Bank said the potential acquisition is line with its strategic goal of deepening its presence in its four core markets – Singapore, Malaysia, Indonesia and the Greater China region (China, Hong Kong, Macau and Taiwan).
“As Hong Kong is a leading North Asia hub for wealth management, Wing Hang also presents OCBC Bank with significant opportunities in private banking for Bank of Singapore,” the bank said.
OCBC Bank (China) has 16 branches and sub-branches in China and one branch each in Hong Kong and Taiwan, and also its private banking subsidiary, Bank of Singapore, has a branch in Hong Kong.
The bank also sees “substantial opportunities” for cross-selling wealth and bancassurance products and services to Wing Hang’s affluent retail customers and SME entrepreneurs.
In January it was reported that OCBC is in talks with the majority shareholders of the Wing Hang Bank.
At HK$125 per share, OCBC’s offer price works out to a premium of around 1.6% over the Hong Kong bank’s last closing price of HK$123, and about 67.3% higher when compared to Wing Hang’s 90-day average price as of 16 September.
OCBC bank considers this to be a fair price given the intrinsic value it sees in Wing Hang’s network, customer franchise and business capabilities.
Wing Hang’s major shareholders, the Fung family and The Bank of New York Mellon Corporation, and certain other Wing Hang shareholders, who together have an approximately 48.2% stake in Wing Hang have agreed to the OCBC Bank offer.
Along with this, OCBC Bank has also agreed to buy a further 2.5% of Wing Hang’s issued share capital from an institutional shareholder. OCBC, therefore, has binding commitments to acquire over 50% of the issued share capital of Wing Hang.
In addition to the offer price, Wing Hang shareholders will be entitled to receive the 2013 final dividend of HK$1.62 per share, and also an interim dividend of HK$0.46 per share if the pre-conditions are not satisfied or waived on or before 30 June 2014.
Patrick Fung, chairman of Wing Hang believes the offer price represents an “attractive opportunity” for its shareholders to realize the investment value of Wing Hang.
“With the strong capability and expertise OCBC Bank possesses, we are also confident that OCBC Bank is the best partner to further grow the Wing Hang business in Hong Kong and the Greater China region, in the future,” Fung said.
The pre-conditional voluntary general offer is subject to certain Hong Kong, Singapore and Macau regulatory approvals.
OCBC Bank said it has sufficient financial resources to satisfy the full the offer, through its own internal cash and cash-equivalent resources and/or a committed loan facility.
OCBC Bank has also committed to the stability of Wing Hang’s business and operations, and said it intends to continue the existing businesses of Wing Hang and also make investments to grow its franchise, adding new products, and services while retaining the management and employees.
There will be no job losses or changes to employment contracts of Wing Hang’s employees for a minimum of 18 months after the offer closing date, OCBC Bank said.