BOC Hong Kong Holdings Ltd., controlled by China’s fourth-largest lender, is seeking to sell its Nanyang Commercial Bank Ltd. unit for HK$68 billion ($8.8 billion), part of a push to focus more on business in Southeast Asia.
The bidding is expected to close Aug. 25, BOC Hong Kong said in a statement Wednesday to the Beijing Financial Assets Exchange. The potential suitor or its controlling shareholder must be a financial institution with Chinese government ownership of more than 50 percent, according to the statement.
BOC Hong Kong said earlier this year it would sell Nanyang Commercial as part of a review of its portfolio which would also involve the takeover of some Southeast Asian assets from its parent, Bank of China Ltd. The asking price announced Wednesday is equivalent to about 1.95 times Nanyang Commercial’s book value at the end of 2014.
“This deal gives the potential buyer full control of NCB. That’s why the seller can ask for a high price,” said Li Shanshan, a Beijing-based analyst at Bocom International Holdings Co. “Deals like this are always expensive.”
No potential buyers were listed in the latest statement. Bad-loan manager China Cinda Asset Management Co., China Life Insurance Co., New China Life Insurance Co. and Yue Xiu Group were shortlisted to make offers for the Hong Kong lender, people with knowledge of the matter said in May.
Yue Xiu Group, the investment arm of the Guangzhou city government, spent $1.5 billion last year for a majority stake in Chong Hing Bank Ltd., valuing the lender at 2.08 times historical book value, according to data compiled by Bloomberg. Singapore’s Oversea-Chinese Banking Corp. paid $5 billion for Hong Kong’s Wing Hang Bank Ltd. last year, valuing the target at 1.77 times on that basis.
Nanyang Commercial saw its rating cut at Moody’s Investors Service in December amid concern about rising bad-loan risks from its rapid mainland expansion. The lender had 42 branches in the city and 38 outlets in mainland China at the end of 2014, with HK$303.9 billion of consolidated assets, according to its annual report.
BOC Hong Kong shares were up 2.6 percent at the mid-day break.
— With assistance by Janet Ong, Vinicy Chan, and Jun Luo