Bank of China

Temasek eyes HK$4.4b from BOC share disposal

PUBLISHED : Tuesday, 27 November, 2007, 12:00am
UPDATED : Tuesday, 27 November, 2007, 12:00am

Temasek Holdings, the investment flagship of the Singapore government, is seeking to sell as much as HK$4.4 billion worth of shares in Bank of China amid concerns about the mainland lender's exposure to the subprime home-loan crisis.

Temasek's unit Asia Financial Holdings has hired Morgan Stanley to arrange the sale of 1.082 billion BOC shares at between HK$4.09 and HK$4.12 each, according to a term sheet sent to investors yesterday.

The price range represents a 2.83 to 3.54 per cent discount to the stock's closing price yesterday.

This will be the first sale of BOC shares by Temasek, which bought a 4.8 per cent stake at HK$2.95 per share during the lender's Hong Kong initial public offering in June last year.

'The transaction reflects the stakeholder's cautious stance towards BOC. The subprime issue is definitely a major concern.' said Samuel Chan at JP Morgan, which has a neutral rating on BOC.

The bank last month disclosed an additional 2.4 billion yuan reserve against possible losses for the third quarter on its subprime-backed assets in the United States. The amount is more than double the 1.1 billion yuan it set aside for subprime loans in the first half.

At the top end of the price range for the share placement, Temasek could book a gain of HK$1.26 billion. Its stake in BOC will fall from 13.5 per cent to 12.3 per cent after the sale.

'Bear in mind that Temasek is selling only a small portion of its holding. It's not a wholesale dumping after all,' said Fox-Pitt Kelton banking analyst Warren Blight.

'Of course, the subprime issue did go through their mind. Other than that, they may also want to book some profit for the financial year to December.'

Temasek also owns 19.99 per cent of China Minsheng Banking Corp, the mainland's only private bank, and 5.99 per cent of China Construction Bank Corp, the country's third-largest commercial lender.

'It's interesting to see such a transaction going through considering the strategic nature of Temasek,' said Credit Suisse analyst Bill Stacey.

Temasek was reported to have been approached by BOC, Industrial and Commercial Bank of China and Construction Bank for the sale of its 17 per cent stake in London-based Standard Chartered. The mainland lenders denied the report.

BOC's shares rose 4.69 per cent to close at HK$4.24 yesterday. The stock has gained 0.36 per cent this year, the worst performer among all state-owned lenders listed on the Hong Kong stock exchange.

Cheaper offer

The sale price is at a 2.83 to 3.54 per cent discount to BOC's market price

After the placement, Temasek Holdings' stake in Bank of China will drop to: 12.3%