HONG KONG â€" One of Singapore’s oldest banks said Tuesday it would pay nearly $5 billion for one of the last major family-owned banking groups in Hong Kong.
The Oversea-Chinese Banking Corporation, a Singaporean bank known as O.C.B.C., said it had reached a deal to buy Hong Kong’s Wing Hang Bank for 38.4 billion Hong Kong dollars, or $4.9 billion.
The deal is the latest example of consolidation in Hong Kong’s small but lucrative and highly competitive banking market, which was once home to dozens of family-run lenders but has gradually come to be dominated by large foreign and mainland Chinese banks.
It also comes at a time when investors have shown concerns over Hong Kong banks’ significant exposure to China. That exposure was seen as a strength until the recent volatility in the Chinese currency and worries over slowing economic growth and rising bad debts.
Following months of negotiation, O.C.B.C. said on Tuesday it had agreed to pay 125 Hong Kong dollars, or about $16, in cash for each share in Wing Hang Bank. The Singapore bank has already secured backing for its offer from Wing Hang’s main shareholders: the Fung family and the Bank of New York Mellon, who together control a stake of around 48 percent.
The purchase price represents a premium of about 49 percent from where Wing Hang’s shares were trading in September, when the bank first disclosed it had been approached about a takeover. The price is 1.6 percent higher than the price when the stock closed on Friday, when trading in the shares was suspended pending an announcement of O.C.B.C.’s offer. The deal values Wing Hang at 1.8 times its book value at the end of December, or 2 times book value after adjusting for dividends and Wing Hang’s reserves against property revaluations.
For O.C.B.C., the deal expands its exposure to China. The bank already owns a stake in the Bank of Ningbo, which is based near Shanghai.
“Wing Hang is a solid franchise with distinctive product capabilities, an impressive network and strong customer base,†Samuel Tsien, O.C.B.C.’s chief executive, said Tuesday in a statement. “Without the opportunity presented by this potential acquisition, I would expect O.C.B.C. to take a much longer period of time, and encounter greater challenges with less certainty of success, before we can fully benefit from continuing internationalization of the renminbi and other developments in greater China,†he added.
Wing Hang was founded in Guangzhou in 1937 as a money changing business by Y.K. Fung and relocated to Hong Kong after World War II.. It has 70 branches in Hong Kong, Macau and mainland China.
Wing Hang is the latest family-owned Hong Kong bank to be snapped up by outside investors seeking greater exposure to the city and to mainland China.
In October, Yuexiu Enterprises, an investment firm controlled by the Guangzhou municipal government, agreed to pay 11.64 billion Hong Kong dollars, or $1.5 billion, for a 75 percent stake in Chong Hing Bank, another family-owned Hong Kong bank. In 2009, China Merchants Bank, a state-owned Chinese institution, acquired full control of Hong Kong’s family-owned Wing Lung Bank.
Goldman Sachs, KPMG and Nomura are the financial advisers to Wing Hang, while Bank of America Merrill Lynch is advising O.C.B.C.
