Wing Hang shares soar on takeover approach
Bank rises nearly 40pc after potential suitors show interest in shareholder stakes, lifting stocks of city's other family-owned lenders
Wing Hang Bank's shares rocketed nearly 40 per cent yesterday after it said its top shareholders had been approached by potential buyers of their stakes, igniting speculation that smaller rival Dah Sing Bank might be next.
It is the city's second family-run bank to have reported similar overtures in two months.
Chong Hing Bank said on Monday that it remained in talks with parties including Yue Xiu, the investment arm of the Guangzhou city government. Local media reported one suitor had raised the offer price to 2.4 times book value from two times.
"Buyers are shopping around the city for local banks," said Frank Yuen, an analyst at BNP Paribas. Seeing that potential buyers of one bank are willing to raise their offers, rival banks may be lured to the negotiating table for a possible sale, he said.
Wing Hang soared 39.3 per cent to close at HK$116.80 yesterday, the highest since February 2011. More than five million shares were traded, against an average of two million per day last week. Chong Hing, the smallest listed family-run bank, closed at HK$32.75, up 3.3 per cent.
Dah Sing, the second-smallest family-run bank, controlled by the Wong family, would be the next potential takeover target, Yuen said. Bank of East Asia would be an unlikely first-round target because it was much larger, he said.
Dah Sing jumped 17.6 per cent to close at HK$13.32. BEA rose 5.6 per cent to HK$33.55.
Dah Sing chairman David Wong Shou-yeh paid HK$451,780 last month to buy 40,000 shares at average prices ranging from HK$11.089 to HK$11.50. Trading volume in the bank surged to 15 million shares yesterday, compared with an average of 1.4 million last week.
"Hong Kong is one of the region's more attractive banking markets, especially given the vast volume of inflow of wealth, cross-border business and yuan transactions," said Kenny Lam, a partner at McKinsey.
"For any serious player in greater China, having a platform [in the city] is very important."
Mainland institutions may also covet banking licences in the offshore yuan hub, analysts said.
The impact on the credit ratings of Chong Hing and Wing Hang would be negative if they were acquired by mainland institutions and developed a more aggressive business strategy on the mainland, said Stephen Long, a managing director at Moody's Investors Service.
The city's small-cap banks have been the subject of takeover rumours for more than a decade even as their business grew more slowly than that of the leading banks.
ANZ Banking and China Life Insurance, which are said to have balked at the prices asked by the controlling families in the past, are once again rumoured to be potential buyers. A buyout of Wing Hang would cost about HK$40 billion at twice book value, analysts estimated.
The number of publicly traded family-run banks in Hong Kong has fallen to four from six more than a decade ago, after Public Financial bought Asia Commercial Bank in 2006 and China Merchants Bank bought Wing Lung Bank in early 2009.
Wing Hang shareholders, including members of chairman and chief executive Patrick Fung Yuk-bun's family, were in preliminary talks with third parties, the bank said on Monday night.