Oversea-Chinese Banking Corp. is nearing an agreement to acquire Wing Hang Bank Ltd., Hong Kong’s second-largest family-run bank, after securing preliminary approval from the city’s banking regulator, according to people familiar with the matter.
The purchase of Wing Hang, which has a market value of HK$37.8 billion ($4.9 billion), could be announced as soon as early next week, the people said yesterday, asking not to be identified because the details are private. A deal would value Wing Hang at about 1.9 times book value, according to one of the people.
Based on last year’s book, that multiple would value Wing Hang at about HK$41.2 billion in Hong Kong’s largest banking takeover since 2001, data compiled by Bloomberg show. OCBC, which entered exclusive talks with Wing Hang’s largest shareholders last year, said last week it held “informal discussions” with the Hong Kong Monetary Authority ahead of the potential offer.
The valuation would be a “fairly steep price, and it’s not easy to make it accretive,” Kenneth Ng, a Singapore-based analyst at CIMB-GK Securities Pte, said by phone. “At this price, the winners will be the selling shareholders.”
Southeast Asia’s second-largest lender is seeking to gain a foothold in the Chinese banking hub as the city’s role in cross-border financing expands. The transaction would follow Yue Xiu Group’s $1.5 billion offer to buy a majority stake in family-owned Chong Hing Bank Ltd., which was approved by the HKMA on Jan. 9.
Pearl River Delta
Shares of Wing Hang rose as much as 9.3 percent yesterday, the most in more than six months, before being suspended pending an announcement under Hong Kong’s takeovers code. OCBC shares fell 1.1 percent before being suspended from trading in Singapore.
Singapore-based OCBC said last month it would extend exclusive talks on a possible offer through March 31. Koh Ching Ching, a spokeswoman for OCBC, declined to comment. The HKMA said in an e-mailed statement it doesn’t comment on matters relating to individual institutions. Cherry Yung, a Hong Kong-based spokeswoman for Wing Hang, declined to comment and referred to the lender’s previous announcement.
Wing Hang said Sept. 16 that its shareholders were in talks to sell their stake. Chairman Patrick Fung’s family, its affiliates and Bank of New York Mellon Corp. together hold about 45 percent of the shares, which would require a buyout bid, the bank said in a filing to the Hong Kong stock exchange that day.
Hong Kong lenders are proving attractive to mainland companies seeking expansion abroad and foreign firms eyeing the Chinese market. OCBC’s larger hometown rival, DBS Group Holdings Ltd., acquired Hong Kong’s Dao Heng Bank Ltd. for HK$41.8 billion in 2001.
Wing Hang would give OCBC a network of about 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, Grace Wu, an analyst at Daiwa Capital Markets Hong Kong Ltd., said by phone Sept. 17.