Chong Hing Bank Ltd. (1111), Hong Kong’s smallest family-run lender, jumped to the highest level since its market debut 19 years ago after Oriental Daily reported that the sale of a stake in the bank may be decided this week.
Shares of the lender, in which the founding Liu family controls about 60 percent, jumped 10 percent to HK$31.70. The benchmark Hang Seng Index rose 1.5 percent.
Yue Xiu Group, the frontrunner to buy the family’s stake, is willing to increase its bid to 2.4 times the bank’s book value, Oriental Daily reported today, without saying where it got the information. The trading arm of China’s Guangzhou city government is considering a bid, a person with knowledge of the matter said last month.
Speculation that Chong Hing will be taken over has pushed the shares up by more than 130 percent since November 28, when Lau Wai-man was named the first chief executive officer from outside the Liu family. An offer of 2.4 times book value would price Chong Hing at about HK$17.7 billion, a premium of 28 percent to today’s market capitalization.
Edith Chan, a Hong Kong-based spokeswoman at Chong Hing Bank, declined to comment on the report when contacted by Bloomberg News. The Yue Xiu office that handles foreign media inquiries had no immediate comment.
In addition to Yue Xiu Group, Australia & New Zealand Banking Group Ltd. (ANZ) and a lender with a Malaysian background are among as many as five bidders interested in Chong Hing, according to the Oriental Daily report.
ANZ in 2008 lost out to China Merchants Bank Co. in acquiring Wing Lung Bank Ltd., a deal that valued the family-run lender at 2.9 times book value, data compiled by Bloomberg show. ANZ Chief Executive Officer Michael Smith called that ratio “crazy,” suggesting that closer to 2 times book value would be a fair price.
“A controlling stake in Asia at the right price will play into ANZ’s regional strategy,” David Ellis, a Sydney-based analyst at Morningstar Inc. (MORN), said by phone. “Smith has experience in Hong Kong and would like to have a larger, more established base for the bank’s Asian operations there. ANZ has been disciplined in its acquisition strategy -- don’t expect the bank to get into a bidding battle.”
Before joining ANZ in June 2007, Smith was head of Asia for HSBC Holdings Plc, based in Hong Kong, where he also served as chairman of the U.K. lender’s Hang Seng Bank Ltd. (11) unit.
ANZ doesn’t comment on strategic matters or market speculation, Libby Armstrong, a Hong Kong-based spokeswoman at the bank, said in an e-mail to Bloomberg News when asked about the Oriental Daily report.
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