Bank of East Asia shares surge 15.2pc as investors bet on potential takeover war

PUBLISHED : Thursday, 12 November, 2009, 12:00am
UPDATED : Thursday, 12 November, 2009, 12:00am

Bank of East Asia shares surged the most in a decade yesterday as investors bet on a potential bidding war between its long-time owners and a Malaysian conglomerate that upped its stake in the bank last week.

BEA zoomed up 15.2 per cent to HK$33.35 as HK$1.3 billion worth of its shares changed hands. It was the lender's largest one-day gain in 11 years of local trading, according to Bloomberg data.

Its market value swelled by more than HK$8 billion and chairman David Li Kwok-po pocketed a paper gain of nearly HK$250 million, based on the 2.9 per cent stake attributed to him by stock exchange data. The Li family, whose grandfather was a founder of BEA in 1918, together own more than 14 per cent of the bank.

Their control may be under threat, however. Malaysia's Guoco Group, led by tycoon Quek Leng Chan, disclosed last week that it had raised its stake in BEA above 8 per cent, bolstering its position as the bank's second-largest shareholder after Spain's Criteria CaixaCorp.

'People think that BEA may somehow come into play,' Howard Gorges, a director at South China Brokerage, said. 'There is a lot of hot money looking for a [target]. And either people are giving it a [push] because you could make stories up about it, or else there is some kind of testing coming up.'

The bank is a leading local lender and has an additional appeal for overseas investors because of its niche in the mainland market.

It is also on the mend after a bruising 2008 and reported a 48.9 per cent year-on-year rise in first-half profits.

Gorges said he did not think Li would want to sell his stake, however, particularly given that the bank was still in the early stages of the recovery cycle. Shares of BEA are down 31.2 per cent since the end of 2007 even after doubling in value this year.

But Guoco may be reluctant in the near term to pay for a big increase in its stake after yesterday's price surge.

'This is the speculation price at this level,' Danny Yan, an assistant director at Taifook Asset Management, said.

Since disclosing a 6 per cent holding in BEA in July, Guoco has gradually increased its stake.

It may have to pay a premium of as much as three times BEA's book value to stage a takeover, according to Dominic Chan, an analyst at BNP Paribas.'It is unlikely they will pay such a high premium to buy BEA when they sold Dao Hang Bank at a similar price tag,' Chan said.

Guoco sold Hong Kong-based Dao Hang Bank to DBS Group Holdings at more than three times book value in 2001.

Spokesmen at Guoco and BEA declined to comment yesterday about any potential stake increases.