OCBC makes offer to acquire Wing Hang Bank for S$6.234b

At offer price of HK$125 per share.

Oversea-Chinese Banking Corporation Limited (OCBC) announced that it has made a pre-conditional voluntary general offer through its wholly owned subsidiary, OCBC Pearl Limited, to acquire the entire issued share capital of Wing Hang Bank, Limited (WHB) at an offer price of HK$125 per WHB share, or a total of HK$38.428 billion (approximately S$6.234b) in cash.

At HK$125 in cash for each WHB share, the price works out to a premium of approximately 1.6 per cent to the last closing price of HK$123, and a premium of approximately 67.3 per cent to the 90-day average price (as of 16 September 2013 close).

The proposed acquisition value is approximately 1.77 times WHB's consolidated net book value as at 31 December 2013. OCBC considers this to be a fair price given the intrinsic value it sees in WHB's network, customer franchise and business capabilities.

OCBC said the acquisition of WHB furthers 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). OCBC Bank has been focusing its operations on capturing capital, trade, investment and people flows associated with China through its close relationships with its customers in this region, both onshore and offshore.

OCBC Bank (China) Limited (OCBC China), OCBC's wholly-owned subsidiary, has 16 branches and sub-branches in China. OCBC Bank also has one branch in Hong Kong and another in Taiwan. ITs private banking subsidiary, Bank og Singapore, has a branch in Hong Kong.

The acquisition of WHB furthers the Bank’s 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). OCBC Bank has been focusing its operations on capturing capital, trade, investment and people flows associated with China through its close relationships with its customers in this region, both onshore and offshore.

The acquisition is also seen to deepen and broaden OCBC’s product capabilities, while providing access to a larger funding base not just in RMB and HKD, but also USD.

Hong Kong is the biggest offshore RMB market, with the largest pool of offshore RMB deposits. It is likely to retain this competitive advantage due to its geographical proximity to mainland China and its economic and historical ties with the country. WHB will provide OCBC Bank with an established franchise and a sizeable platform from which to grow its RMB-denominated businesses.

The range of RMB products and services could be developed or enhanced further to include treasury, trade finance, cash management and payments, capital markets and offshore wealth management offerings. In addition, having access to a stable source of retail and wholesale funding via the WHB franchise will support growth of loans denominated in RMB. WHB’s deposit base in HKD and USD will be an additional source of stable funding.

Overall, OCBC said the acquisition gives both banks greater scope in product capabilities, network size, customer base and market coverage, with minimal duplication. WHB therefore offers OCBC Bank an opportunity for accelerated growth.

OCBC Bank said it will invest in systems and channels and product capabilities over time to nurture the WHB franchise, and grow WHB’s business in areas such as treasury, corporate and SME banking, investment banking, cash management and payments, trade finance and wealth management. It will also invest significantly in human resources by, for example, putting in place comprehensive training and development programmes.

“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 the continuing internationalization of the Renminbi and other developments in Greater China. We will leverage the complementary capabilities of Wing Hang and OCBC to derive substantial synergistic value. Our customers will benefit from a wider selection of products and services while gaining access to a much broader network. We are also committed to investing in Wing Hang’s business and employees to better serve our enlarged customer base," said Mr. Samuel Tsien, CEO of OCBC Bank.

"We are therefore very excited about this potential partnership, which would further establish us as a leading, well-diversified Asian financial services group with a broad geographical footprint in North and South East Asia," he added.

“The board is delighted to have reached an agreement with OCBC. We believe the offer price represents an attractive opportunity for our shareholders to realize the investment value of Wing Hang. With the strong capability and expertise OCBC possesses, we are also confident that OCBC is the best partner to further grow the Wing Hang business in Hong Kong and the Greater China region, in the future," said Mr. Patrick Fung, Chairman of Wing Hang Bank.

"It was critical to us that OCBC demonstrated a commitment to the stability of Wing Hang’s business and that we were able to ensure the protection of our loyal and trusted employees who have been instrumental to our success. I am optimistic about Wing Hang’s prospects and I believe with the continued dedication and collaboration of our employees and partners, OCBC’s contribution will enhance Wing Hang’s capabilities and benefit our customers in the long-term," he added.