Two sources told Bloomberg that Singapore-based Oversea-Chinese Banking Corp or OCBC has given a binding bid for Wing Hang Bank Ltd. OCBC is the second largest lender in Southeast Asia while Wing Hang is a Hong Kong-based family-run bank.
The people with knowledge of the matter said OCBC has already done due diligence in the matter and gave an offer of less than the two times the book value that Wing Hang was looking for. They spoke on the condition of anonymity since the information was confidential. The sources said the firms are talking if they could bridge the gap in valuation. Bloomberg data revealed that the market value of Wing Hang is $4.6 billion, which represents 1.7 times its estimated book value in 2013.
If OCBC purchases the Hong Kong lender, this could be its largest acquisition to date. Bloomberg reported that the Singaporean lender is ramping up its expansion plans abroad as it looks to compensate the lowest lending margins in Southeast Asia. OCBC generates nearly two-thirds of its revenue from Singapore, its home turf. Led by Chief Executive Officer Samuel Tsien, OCBC has been expanding in Indonesia, Malaysia and Greater China. In an October report, Citigroup Inc Analyst Robert Kong said fresh capital would be needed by OCBC to purchase Wing Hang Bank. The Singaporean lender would also most likely want full ownership of the lender.
The Hong Kong-based family-run lenders, which have been facing tough competition from larger banks like HSBC Holdings and Bank of China Ltd, are now getting noticed by acquirers as Hong Kong's role in cross-border financing grows, the report said. In November, Yue Xiu Group agreed to purchase a majority stake in Chong Hing Bank Ltd in a $1.5 billion deal.
Wing Hang Bank is 45%-owned by the family of Wing Hang Chairman Patrick Fung, their affiliates and the Bank of New York Mellon Corp.
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