Bank of East Asia

Billionaire Quek makes US$1.1b bid to buy out Guoco

PUBLISHED : Wednesday, 12 December, 2012, 2:45pm
UPDATED : Wednesday, 12 December, 2012, 2:45pm

A group led by Malaysian billionaire Quek Leng Chan offered HK$8.25 billion (US$1.1 billion) to take Guoco Group private after the financial and real-estate company trailed a rally in Hong Kong stocks.

The group is offering HK$88 a share, 25 per cent more than the closing price before the stock was suspended on December 4, according to a statement to the Hong Kong exchange. Guoco jumped as much as 29 per cent in morning trading.

The proposed privatization would give Guoco Chairman Quek more control of the company’s 15 per cent stake in Bank of East Asia, Hong Kong’s biggest family-run bank, worth about HK$9.5 billion. Quek’s net worth is estimated at US$3.9 billion today, according to the Bloomberg Billionaires Index. Guoco had fallen 2.4 per cent this year before today, trailing a 21 per cent gain in the benchmark index.

A buyout “will provide the offeror group with greater flexibility to support its future business development,” Guoco said in the statement.

Guoco was 29 per cent higher at HK$91 as of the midday break in Hong Kong, heading for the biggest increase since April 2001.

Wednesday’s offer was made by a subsidiary of Hong Leong, which is 49 per cent controlled by Quek.

Guoco reported a net loss of HK$1.29 billion for the year ended June 30, compared with net income of HK$4.16 billion for the previous 12 months as weaker financial markets trimmed profit from its property and financial units, according to its annual report.

Bank of East Asia may become an acquisition bet, Deutsche Bank said last month after Sumitomo Mitsui Financial Group won approval from the US Federal Reserve to boost its holding in the Hong Kong lender to as much as 9.9 per cent from the current 4.7 per cent.

A unit of Sumitomo Mitsui, Japan’s second-biggest bank by market value, agreed to buy new stock in Bank of East Asia on December 4, doubling its stake to 9.5 per cent.

Spain’s CaixaBank and Guoco Group were among shareholders that have increased their stakes in Bank of East Asia as its shares underperformed those of local rivals, Deutsche Bank analyst Sophia Lee said last month. The two are the biggest investors in the bank, according to Bloomberg data.

Still, taking Guoco private would mean Quek would lose one source of financing, said Mike Werner, an analyst at Sanford C. Bernstein.

“By privatizing, they won’t be able to raise equity to support purchases and/or a possible takeover for BEA,” Werner said.