Chong Hing drops 8pc as takeover frenzy subsides
Shares in Chong Hing Bank dropped the most in five years yesterday as trading in the stock resumed after the lender accepted an HK$11.6 billion takeover bid from mainland investment firm Yue Xiu.
Shares in Chong Hing Bank dropped the most in five years yesterday as trading in the stock resumed after the lender accepted an HK$11.6 billion takeover bid from mainland investment firm Yue Xiu.
"We believe that Chong Hing Bank's share price will return to levels consistent with normal banking operations" without any merger and acquisition premium, Steven Chan, an analyst at Maybank Kim Eng Securities, wrote in a report yesterday. The stock might fall to HK$18.31, he said.
The stock had jumped 173 per cent since November last year after Lau Wai-man was named its first chief executive from outside the founding Liu family, giving the lender a valuation 69 per cent higher than the average for the largest Hong Kong-traded banks.
The first acquisition of a Hong Kong lender since 2009 will give Yue Xiu, controlled by the Guangzhou city government, a network of 53 branches and help it seek funding outside the mainland.
Chong Hing wanted to sell its headquarters to its parent firm, from which it would pay a dividend of HK$4.5195 per share to investors accepting Yue Xiu's bid, the statement said.
Shares in the lender were suspended for two days after a 7 per cent surge on Wednesday following reports that it was nearing a deal with Yue Xiu. The bank traded at 2.2 times book value, more than the average multiple of 1.3 for the 16 largest bank stocks listed on the Hong Kong exchange.
Yue Xiu, founded in 1985, needs approval from the Hong Kong Monetary Authority to buy the stake in Chong Hing.
Companies controlled by the Liu family will sell shares equal to about 51 per cent of the bank.
The mainland firm, which operates in businesses including real estate, securities and transport infrastructure, said it intended to keep Chong Hing's stock exchange listing.
Hong Kong's role as an international centre for trade in yuan has attracted mainland financial institutions seeking to expand abroad.
Nomura is advising Yue Xiu, while UBS is Chong Hing's adviser.
