Shares of Chong Hing Bank, the Hong Kong lender 59 per cent-owned by the Liu family, jumped 11.4 per cent to close at HK$17.58 yesterday, after rising as much as 14 per cent during the day.
The sharp rise in the share price followed a statement from chief executive Felton Lau Wai-man at a press conference on Thursday that Chong Hing was open to proposals from potential buyers for all or part of the bank.
Goldman Sachs said it had raised its 12-month target price for the bank to HK$13.70 from HK$12.60, though it maintained its "sell" call on the bank owing to further franchise marginalisation and an absence of mergers and acquisitions in the sector.
Chong Hing aimed to help its shareholders by making use of good opportunities, and that included chances of an acquisition, co-operation, or mergers, Lau said. Takeover speculation has mounted since November, when Lau replaced his predecessor Liu Lit-chi, a member of the founding family who spent more than 50 years at the bank.
Chong Hing Bank reported net profit declined 3.1 per cent to HK$543.3 million last year, translating into earnings of HK$1.25 per share and return on equity of 7.64 per cent.
Sale of the shares of Chong Hing Bank, a subsidiary of Liu's Holdings, to people outside the Liu family is limited by a deed which was signed by the founder in 1972.
In terms of the deed, if a Liu family member wants to sell shares in Liu's Holdings, he or she needs to offer to sell such shares to other shareholders at a discount of 5 per cent of the average closing price of the stock for the preceding 30 trading days.
If none of the shareholders buy the shares, then he or she has to surrender control of the shares and in return get 95 per cent of their entitlement if Liu's Holdings is wound up.