OCBC, Southeast Asia’s second-largest lender, and its insurance unit Great Eastern Holdings Ltd. (GE) were approached about a possible offer for their United Engineers shares, they said in a joint stock exchange filing yesterday without naming the suitor. Thai billionaire Charoen Sirivadhanabhakdi is in talks to buy the holding, Bloomberg News reported yesterday.
The discussions are at an early stage, according to the announcement. OCBC, Great Eastern and the bank’s founding Lee family together own 34.1 percent of United Engineers, according to a filing in August last year. Buying more than a 30 percent stake would trigger a mandatory takeover offer for the company under Singapore rules.
United Engineers shares jumped as much as 14 percent in early trading in Singapore, the biggest gain in five years, after being suspended following a 7.4 percent increase yesterday. The two-day rally pushed the company’s market value to S$1.77 billion ($1.4 billion).
Selling the stake would help OCBC bolster capital after its $5 billion takeover of Hong Kong’s Wing Hang Bank Ltd. this year. Companies backed by Charoen have announced $4.5 billion of acquisitions this year, data compiled by Bloomberg show.
In 2012, OCBC entered talks to sell its holdings in Fraser & Neave Ltd. and Asia Pacific Breweries Ltd. to Charoen’s Thai Beverage Pcl. That touched off a three-front bidding war for the two companies, with Heineken NV eventually buying Asia Pacific Breweries and Charoen beating out OUE (OUE) Ltd. for Fraser & Neave in deals that totaled $15 billion, data compiled by Bloomberg show.
“The F&N takeover demonstrated that Charoen is a savvy investor who will not overpay for assets,” said Xuan Tan, an analyst at CIMB Group Holdings Bhd., in a note yesterday. “In the long term, the assets offer enhancement potential. Although the discussions are still at an early stage, we think that there is a high likelihood of this transaction coming true.”
Tan raised her target price for United Engineers to S$2.53 from S$2.22.
OUE had earlier expressed interest in OCBC’s stake in United Engineers, though those talks are no longer active, said one of the people. OCBC and its units also control 69 percent of the company’s preference shares, according to United Engineers’ latest annual report.
Soammaphat Traisorat, chief executive officer of Charoen’s Bangkok-based TCC Land Co. unit, didn’t respond to phone calls or e-mails seeking comment. Spokesmen for OCBC and OUE declined to comment.
United Engineers shares traded at S$2.77 at 11:08 a.m. local time. The average price in the two months before Bloomberg News first reported on OCBC’s talks was S$2.35, data compiled by Bloomberg show.
Charoen is Thailand’s richest man with a $12.7 billion fortune, according to the Bloomberg Billionaires Index. He controls an empire whose businesses span industries from beer to property development.
Frasers Centrepoint Ltd., a developer controlled by Charoen, succeeded this month in gaining control of Sydney-based Australand Property Group in a $3.4 billion deal, according to data compiled by Bloomberg. His consumer goods distributor, Berli Jucker Pcl, agreed Aug. 7 to buy Metro AG’s wholesale stores in Vietnam for $874 million including debt.
United Engineers, which bought Singapore-based builder WBL Corp. last year for $725 million including debt, was founded in 1912 as an engineering company that helped build Singapore’s Shangri-La hotel and historic supreme court.
The company last week said second-quarter profit doubled as it booked income from recently completed residential properties. United Engineers’ properties includes the UE Square shopping mall in central Singapore, and it owns real estate projects in five Chinese cities through WBL, according to the companies’ websites.
United Engineers agreed to sell its MFS Technology business this month for S$124 million, and its engineering unit said in March that its parent was in talks to sell its stake. United Engineers is also divesting its luxury-car dealership, according to people familiar with the matter.
OCBC Chief Executive Officer Samuel Tsien said this week that he’ll look to sell “non-core” assets following the Wing Hang purchase. The Singaporean bank plans to raise S$3.4 billion by selling shares to existing investors to replenish capital after the acquisition.
To contact the reporter on this story: Joyce Koh in Singapore at firstname.lastname@example.org
To contact the editors responsible for this story: Philip Lagerkranser at email@example.com Ben Scent, Amit Prakash