Fubon Bank shares up after buy-back offer

PUBLISHED : Friday, 21 January, 2011, 12:00am
UPDATED : Friday, 21 January, 2011, 12:00am

The share price of Fubon Bank (Hong Kong) rose to its highest level in more than two years yesterday after its parent offered to buy back shares at a premium to privatise the bank.

The stock rose HK$1.10, or 29.1 per cent, to HK$4.88 when it resumed trading yesterday after a 10-day suspension. Fubon Financial Holding, Taiwan's second-largest financial services company, offered to buy back the 25 per cent of ordinary shares it does not own at HK$5 each, a 32 per cent premium to the stock's close on January 7.

'The share price rise basically reflects the privatisation price,' said Paul Lee, an analyst at Haitong International Securities Group. 'The final day of trading should move towards HK$5.'

The offer price was not expensive, Lee said, adding that market reaction suggested that the privatisation should go smoothly, although there was still a risk that minority shareholders might reject the deal.

Fubon would need approval from minority shareholders and High Court permission to privatise the bank. Fubon said it expected the total deal to cost it about HK$1.47 billion.

Fubon also said in a report that privatising its Hong Kong division would help improve operational efficiency and save listing costs.

Timothy Li, an analyst at Core Pacific-Yamaichi International, said privatising the Hong Kong unit would help Fubon avoid dilution of its interests. All of its investment return from the mainland would go to the holding company, instead of the 75 per cent it received at present.