Wing Hang Bank

More than HK$40b to take Wing Hang Bank private, says source

Three parties are reported to be interested in the city's second-largest family-owned lender, which could go for about two times book value

PUBLISHED : Tuesday, 03 December, 2013, 11:26am
UPDATED : Wednesday, 04 December, 2013, 6:12am

Wing Hang Bank's potential suitors may need to pay more than HK$40 billion to take the city's second-largest family-owned bank private.

More than three parties were talking to Wing Hang, a person familiar with the situation said.

Those who showed the most interest aimed at a full takeover, he said.

The potential deal would echo China Merchants Bank's acquisition of Wing Lung Bank in 2007. The local bank was delisted after the sale.

However, it would stand in contrast with Yue Xiu's offer to Chong Hing Bank last month.

The Guangzhou city government's investment arm said it would make a partial offer and retain Chong Hing's listing.

A reasonable price could be about two times book value, lower than the 2.08 times Yue Xiu was prepared to pay to acquire up to 75 per cent of Chong Hing's shares, the person said.

"If the price to book could be higher than 2.08 times, then it would be a jackpot for Wing Hang," he said. "But a price lower than that would be more likely."

Assuming the final price is set at two times book value, the successful suitor would have to pay HK$40.8 billion for Wing Hang's 307.4 million shares.

The bank's shares closed at HK$113.60 yesterday, 1.7 times book value.

Barclays maintained its rating of Wing Hang at "equal weight" and the price target at HK$126.

"We believe the market has priced in the likelihood of the discussions with potential bidders coming to fruition," Barclays' Sharnie Wong wrote in a report.

The family of chairman and chief executive Patrick Fung Yuk-bun and Bank of New York Mellon, which together control 45 per cent of Wing Hang, first announced in September they had entered into discussions with third parties to sell their stake.

The Agricultural Bank of China, China Minsheng Bank, Singapore's United Overseas Bank and Oversea-Chinese Banking Corp are rumoured to be potential suitors.

Beijing-based Anbang Insurance and Canada's Bank of Nova Scotia were also considering a bid, Bloomberg reported.

"Chinese banks and those in the region would see strategic value in a meaningful presence in Hong Kong," said Grace Wu, an analyst at Daiwa Capital Markets. "The city is an important financial centre in offshore yuan business."

While robust growth in Wing Lung and ICBC (Asia) was reported after mainland banks acquired them, less significant growth occurred at CCB (Asia), which was smaller in its branch network and asset size.

Wu said: "That was a strong reason [for the suitors] to bid for a Hong Kong bank with a meaningful scale to make the synergy in cross-sale and cross-border business more effective."