The future of Dao Heng Bank remains unclear, with some senior employees told this weekend that Singapore's DBS Bank has agreed to buy a controlling stake from the Malaysian Guoco Group. Friday's suspension of trading in Guoco shares and its 71.47 per cent-held subsidiary Dao Heng Bank, at the firm's request, led to expectation of a major group restructuring. A takeover by the expansion-minded DBS has been rumoured since early this year. A senior manager told Business Post he was informed this weekend that DBS had agreed to buy control from Guoco but said no details were given. 'It's definitely DBS. The announcement could be made [today],' he said. On Friday, Guoco - 32 per cent-controlled by Malaysian tycoon Quek Leng Chan - would not comment on the reasons for the trading suspensions and executives could not be reached yesterday. A banking source close to the negotiations said discussions had been going on for some months and if a deal was completed the price would be about three times Dao Heng's book value. He said the deal was complicated by DBS's low market rating and it might see DBS place a substantial block of new shares to a strategic banking partner. On Friday many commentators doubted that DBS was the buyer, as its shares were not suspended from trading. But the banking source said suspension criteria in the Singapore market was not as stringent as in Hong Kong. The Kuwaiti Investment Office, which holds a 10 per cent stake in the Guoco Group, was also touted as a potential buyer. Analysts also suggested the stock suspension could herald a long-awaited restructuring of the banking arm and separately held financial services arm. Dao Heng's share price was $37.60 when suspended on Friday. The Dao Heng manager said: 'Assuming they pay a slight premium at 44 bucks, it will be about S$18 billion (HK$77.4 billion). It derails a lot of the expansion plans and everything will be up in the air.' In an aggressive acquisition spree, DBS has spent S$645.4 million for an 87.3 per cent stake in the former Kwong On Bank in Hong Kong; S$829.5 million for an ownership stake in Thai Danu Bank; another S$1.2 billion on 19.7 per cent of Bank of the Philippine Islands; and S$1.6 billion to take over the Singapore savings bank POSB. DBS has a reported S$6 billion war chest and a stated intention to expand in Hong Kong, where its presence remains insignificant despite the Kwong On takeover. However, last month vice-chairman and chief executive Philippe Paillart said: 'Do not expect a one-off, big-ticket takeover.' Dao Heng represents a prime SAR banking asset which was built from scratch by the Guoco group. It is regarded as a well-managed, transparent bank that employs successful cross-selling of investment products and has a strong credit-card operation. One banker suggested that a deal with the Singapore government-controlled DBS may serve to improve Guoco's Mr Quek's sometimes rocky relationship with the Singapore authorities.
