Oversea-Chinese Banking Corp. (OCBC), which is buying Wing Hang Bank Ltd., achieved the “most important thing” by gaining control of more than 50 percent of the Hong Kong lender, Chief Executive Officer Samuel Tsien said.
OCBC, as the Singapore lender is known, will forge ahead to garner more Wing Hang stock even as hedge fund Elliott Capital Advisors LP buys shares of the Hong Kong bank, Tsien said in an interview in Singapore yesterday.
“We know that they’re there, but in terms of would it distract us or change us from what we’re currently doing, it will not,” Tsien said. “We’ll just proceed according to the general offer document and if we cannot get 90 percent, we’ll keep the company listed.”
OCBC bid $5 billion for Wing Hang in April, an offer that has been accepted by 50.4 percent of the shareholders, including the family of Wing Hang’s Chairman Patrick Fung and Bank of New York Mellon Corp. Billionaire Paul Singer’s Elliott Capital said last week it boosted its stake in Wing Hang, which Mizuho Securities Asia Ltd. said could put pressure on OCBC to raise its offer price.
Elliott Capital increased its stake in Wing Hang to 7.8 percent by purchasing an additional 8.7 million shares, it said in a July 3 filing posted on the website of Hong Kong’s Securities & Futures Commission. The shares were bought at HK$125 ($16), the same as OCBC’s offer.
Wing Hang shares traded as high as HK$127 on July 7 following Elliott’s purchase, exceeding OCBC’s bid price. The stock rose 0.2 percent in the past week, while OCBC dropped 1 percent.
“The price we paid is fair and very reasonable, so whatever happens in the market is something that the investors would have to consider,” Tsien said. “We’ll continue with the strategy because the value will still be realized as long as we own more than 50 percent.”
Under Hong Kong takeover rules, OCBC needs to own at least 90 percent of Wing Hang’s shares to delist the bank. OCBC will have to keep its stake at 75 percent or less if it fails to meet that acceptance level to delist Wing Hang before the offer expires on July 29.
Shares of Wing Hang may fall as much as 40 percent if OCBC doesn’t garner enough to delist the company, Credit Suisse Group AG analysts Sanjay Jain and Vineet Thodge wrote in a note to clients on July 8.
The acquisition will give OCBC more access in the Greater China region and enable both banks to offer services to Chinese companies expanding in Southeast Asia, where it has a larger presence, Tsien said.
Wing Hang gives OCBC a network of about 70 branches spanning Hong Kong, Macau and mainland China. The Hong Kong lender’s presence across southern China’s Pearl River Delta, where OCBC has only one branch, makes it an attractive target, the CEO said.
The bid is the largest takeover of a Hong Kong bank since DBS Group Holdings Ltd., OCBC’s biggest competitor in Singapore, offered $5.4 billion for Dao Heng Bank Group Ltd. in April 2001.
OCBC, which bought ING Groep NV’s Asian private-banking business in 2009 for $1.46 billion, is also open to more acquisitions to boost its wealth-management business “should there be available ones,” Tsien said.
The owners of Wing Hang (302)’s corporate clients, primarily small and medium-sized companies, are also targets for OCBC’s private-banking business, said Tsien.
The acquisition will be funded with equity and debt, said Tsien, without indicating the proportion of each as the bank isn’t sure of the stake it will be able to obtain.
OCBC isn’t planning to sell insurance unit Great Eastern Holdings Ltd. to shore up capital ratios, according to Tsien. Kevin Kwek, a Sanford C. Bernstein & Co. analyst, cited a sale as a possibility in a July 1 note to clients.
“We treat GE as an integral part of OCBC group,” Tsien said. The bank wants capital ratios “to be at a comfortable cushion above the regulatory requirement and comparable” to the other Singapore banks, he added.
OCBC’s common equity Tier 1 capital ratio was 14.4 percent at the end of March. That compared with 13.1 percent for DBS and 14 percent for United Overseas Bank Ltd. (UOB), the third-largest Singapore lender, according to company filings.
If OCBC acquires all of Wing Hang without raising any equity, the capital ratio could decrease to about 11 percent, Eugene Tarzimanov, a Singapore-based analyst at Moody’s Investors Service, said in an e-mailed response to questions on July 9. If it acquires 75 percent, the ratio could decline to 11.4 percent, he said.
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