bodyType

customContents

entityId

entityUuid

articlePageQuery

filter

article

articleBaseAdvertisingInfoArticle

articleListArticle

articleSeoArticle

hooksArticleAcknowledgementGateOverlayArticle

hooksTrackPageViewArticle

hooksContentInterestArticle

articleLinkingDataContent

hooksAmpRedirectArticle

articleSchemaContent

liveArticle

advertZone

sentiment

contentLock

topics

types

sections

paywallTypes

createdDate

publishedDate

sponsorType

urlAlias

moreOnThisArticles

commentCount

authorLocations

authors

corrections

displaySlideShow

multimediaEmbed

printHeadline

seriesContainer

articleSpeeches

socialHeadline

headline

images

flag

firstTopic

glossary

flattenTypeIds

image

relatedLinks

relatedNewsletters

__typename

sponsor

pdfFiles

seriesReverseOrder

series

disableOffPlatformContent

published

updatedDate

summary

subHeadline

body

keywords

readingTime

customTimezone

liveContents

Raymond Ma

Arab Banking agrees to sell its 55pc stake for $2.37 billion

Taiwan's Fubon Financial  will acquire 55 per cent of International Bank of Asia (IBA) from  Bahrain-based Arab Banking Corp for $2.37 billion, marking the third local bank acquisition in just over a month.

Fubon, Taiwan's  second-largest financial services company,  will  pay Arab Banking $3.68 per share - or 1.16 times  book value.

Arab Banking originally revealed its intention to divest  its stake in IBA in December last year, but talks were complicated by the two parties'  differing price expectations.

Fubon will also make a general offer for IBA's remaining shares, including the 20 per cent stake  held by mainland financial services company China Everbright.

The acquisition is subject to approval by Hong Kong and Taiwanese regulators and other undisclosed conditions. China Everbright executives were not available for comment yesterday.

Based on IBA's unaudited interim financial statements,  the deal values it at  $4.31 billion. IBA did not disclose when the deal would be completed.

'The acquisition of IBA is an attractive opportunity to expand into Hong Kong's financial services industry,' Fubon co-chief executive Richard Tsai said. 'Fubon intends to leverage IBA's existing franchise and grow the business.'

Declining returns  stemming from low loan demand  have forced many Hong Kong bank owners  to part with their shareholdings.  The slump has driven down  the price tags of local banks  and attracted bargain hunters.

While most market watchers agreed that the 1.16 times book value Fubon was willing to pay for IBA constituted good value for the small bank's shareholders, it was uncertain whether it would be able to create  revenue or cost synergies.

'This is a cross-border acquisition, so it's much harder to perceive much in the way of revenue or cost synergies,' CLSA banking analyst Dominic Chan said.

IBA has only 24 branches in Hong Kong.

Sunil Garg, the head of  Asian banks research at Fox-Pitt Kelton,  said that while IBA's valuation was not 'massively pricey', it had a chequered history of low returns.

IBA recently reported a 45 per cent drop in net profit for the first half, as it chased mortgage business at rock-bottom prices.

However, UBS head of Asian banking research John Wadle expects Fubon  to bring marketing  expertise and Taiwanese customers  to help turn around the bank.

'IBA is a nice, low-risk conservative bank. It's just  too small and  doesn't have the scope to leverage itself,' Mr Wadle said.

'The 1.16 times  [Fubon] is paying is a fair price provided that  it can  enhance the business activities of the bank.'

While some analysts said Fubon might be eyeing expansion on the mainland using IBA, Taiwan's Ministry of Finance said yesterday that such practices would not be allowed.

Founded in 1982 as  Sun Hung Kai Bank, IBA is no stranger to takeovers. About 75 per cent of the bank's shares were bought by Arab Banking  in 1985, which replaced much of its management team and subsequently renamed it.

In 1990, Arab Banking  bought out the bank's remaining shares, only to take on China Everbright as a partner  three years later and list it on the stock exchange.



Taiwan's Fubon takes over IBA