Sumitomo bid for bigger stake could be BEA's saviour
Analysts say the Japanese lender's increased stake may help HK bank block hostile takeovers
Japanese lender Sumitomo Mitsui's expected bigger stake in Bank of East Asia could help the Hong Kong family-controlled bank fend off hostile takeovers, analysts said.
Bank of East Asia's share price rose 2.27 per cent to HK$29.25 amid a strong market yesterday after Sumitomo Mitsui, Japan's second-biggest bank by market value, received approval from the United States Federal Reserve to boost its holding in BEA to 9.9 per cent from 4.7 per cent.
Both banks have operations in the US and need approval from the US regulator for such purchases.
BEA chairman David Li Kwok-po denied the bank was issuing new shares for the deal, Commercial Radio said yesterday.
One banker familiar with the matter said Sumitomo Mitsui submitted the application for approval about a year ago and had informed BEA at the time.
The deal comes as the Li family faces the threat of a reduction in its control. For the past three years, Quek Leng Chan, the chairman of Malaysia's Guoco Group, has been buying shares, supposedly with a takeover in mind.
"By having several strategic investors, the Li family may be able to neutralise the chance of a hostile takeover," said James Antos, of Mizuho Securities.
Caixabank of Spain owns 17.1 per cent of BEA, and Guoco owns 15.09 per cent. According to listing rules, the Li family is not required to disclose how much it owns.
"We talk regularly to our strategic investors, including but not limited to SMBC (Sumitomo Mitsui Banking Corp). We have been supportive of SMBC being one of our long-term shareholders," a BEA spokeswoman said.
BEA generates 40 per cent of its loans and revenue from the mainland, the highest of any bank not based there.
"Sumitomo probably wants to build its China business, and the tie-up with BEA would be a diplomatically easier route at this point than trying to expand directly in China," Antos said.
A stake increase by Sumitomo Mitsui could result in an equity injection of HK$3.5 billion into BEA, Morgan Stanley analyst Anil Agarwal said in a note.