http://www.todayonline.com/business/ocbc...nk-sources
SINGAPORE — Oversea-Chinese Banking Corp (OCBC) has made a binding bid for Hong Kong’s family-run Wing Hang Bank worth about S$6.7 billion, two people with knowledge of the matter said yesterday, in what could become the Singapore lender’s biggest acquisition.
OCBC conducted due diligence and offered about but less than the two times book value Wing Hang was seeking, said the sources, who asked not to be identified as the information was private. The companies are in exclusive talks to bridge the valuation gap, the sources said.
Binding bids were due in the middle of last month and it remains unclear if the two parties are likely to seal a deal. OCBC declined to comment yesterday, while Ms Connie Leung, a Hong Kong-based spokeswoman for Wing Hang, also declined to comment.
The Hong Kong bank has a market value of US$4.6 billion (S$5.8 billion), which is 1.7 times its estimated 2013 book value, data compiled by Bloomberg show.
OCBC, which gets almost two-thirds of its revenue from Singapore, is stepping up overseas expansion plans as it seeks to offset the lowest lending margins in South-east Asia.
Banks in Singapore have an average net interest margin of 1.77 per cent, according to data compiled by Bloomberg. While that is higher than Hong Kong’s 1.73 per cent, the Chinese city is seen by lenders as a gateway to the mainland and a way to benefit from increasing global use of the yuan.
Led by Chief Executive Samuel Tsien, who was raised in Hong Kong, OCBC has been expanding in Greater China, Malaysia and Indonesia. The Singaporean bank would need fresh capital to acquire Wing Hang and would likely seek full ownership, Citigroup analyst Robert Kong said.
The family of Wing Hang Chairman Patrick Fung, its affiliates and Bank of New York Mellon together hold about 45 per cent of shares in the Hong Kong lender.
Hong Kong’s family-run banks, squeezed for years by larger competitors including HSBC Holdings and Bank of China, have been attracting interest in recent months from acquirers as the city’s role in cross-border financing expands.
China’s Yue Xiu Group agreed in November to buy a majority stake in Chong Hing Bank for US$1.5 billion, the first acquisition of a Hong Kong lender since 2009.
Wing Hang would give a buyer a network of 70 branches spanning 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, said Ms Grace Wu, an analyst at Daiwa Capital Markets Hong Kong.