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05-07-2022, 04:15 PM
the rocky 2001
By Sara Webb and Hasan Jafri Staff Reporters of The Wall Street Journal
June 13, 2001 3:41 pm ET
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SINGAPORE -- The long-awaited consolidation of the banking sector in Singapore took a step forward as the nation's third-biggest bank, Oversea-Chinese Banking Corp. , unveiled a 4.8 billion Singapore dollar (US$2.7 billion) surprise takeover bid for the nation's smallest bank, Keppel Capital Holdings Ltd.
If successful, the acquisition would make OCBC Singapore's second-largest bank by assets, and would generate considerable savings, OCBC said.
However, it isn't a done deal for OCBC. Lim Chee Onn, chairman of Keppel Capital, said late Tuesday, "We are in talks with other local banks, including OCBC, which have indicated interest in [Keppel Capital] and its subsidiaries." Mr. Lim added that while Keppel Capital will evaluate OCBC's offer, "we advise shareholders and warrant holders to take no action until they receive further notice" from Keppel Capital.
Government Pressure
Following the 1997-98 Asian financial crisis, Singapore has been urging domestic banks to merge to survive tougher competition from foreign banks such as HSBC Corp. , Citibank and ABN-Amro.
But there has been little action in recent years in Singapore other than in the state-controlled sector. In 1998, government-controlled Development Bank of Singapore Ltd. acquired the government-owned Post Office Savings Bank, known as POSBank.
HOW THEY COMPARE
Singapore Banks by size at the end of 2000, in Singapore dollars:
Total net profit (billions)Assets after tax* (millions)Development Bank of Singapore 111.21,390United Overseas Bank66.3912.9Oversea-Chinese Banking Corp.59.7840Overseas Union Bank46.6545Keppel Capital26301.5
*For year 2000
Sources: Singapore Exchange Web site, the companies.
While the government has repeatedly prodded Singapore's banks to consolidate, the family-controlled banks have appeared reluctant to give up control of their businesses. There was speculation at one time that OCBC might be interested in acquiring Overseas Union Bank. But that deal never materialized, and Overseas Union had been in talks to sell a stake to BNP-Paribas SA.
OCBC has made "a number of false starts' said Kevin Scully, head of NetResearch in Singapore. Some of OCBC's Internet banking operations have proved unsuccessful, while plans to divest itself of property interests were postponed earlier this year due to unfavorable market conditions, he added.
A 14% Premium
OCBC said Tuesday it will make a cash offer for all Keppel Capital shares at S$3.38 each, a 14% premium to Keppel Capital's closing price of S$2.96 on Monday. Keppel Capital shares closed at S$2.97 Tuesday, while OCBC shares in Singapore rose 2.8% to S$11.
OCBC values Keppel Capital at S$4.8 billion. OCBC said it will offer S$1.01 for each Keppel Capital warrant.
"The acquisition of [Keppel Capital] will represent the next step forward in OCBC Bank's mission to be a world-class financial institution in Asia Pacific," OCBC said. "The combination of the businesses will establish OCBC Bank as clearly the second-largest Singapore bank, enhancing its ability to pursue expansion in its core markets of Singapore, Malaysia and Greater China."
OCBC Bank's offer will be conditional on, among other things, regulatory approvals and OCBC Bank acquiring more than 50% of Keppel Capital.
'Very Cheap'
Analysts said OCBC is offering a relatively low price for Keppel Capital. "It's [1.7] times book, and very cheap," said Sam Chin, an analyst at ABN Amro Asia Securities.
That is in stark contrast to DBS Group Holdings Ltd. 's planned purchase of Dao Heng Bank Group Ltd. , at more than three times book value, said Mr. Chin. "They are buying a bank with the same number of loans as Dao Heng at half the price," he said.
Keppel Capital is the banking arm of government-linked Keppel Corp. , which owns 37% of the lender. Allied Irish Bank PLC has an option to buy 24.9% of Keppel Capital by June 2002. Banking and finance contribute a significant portion of Keppel Corp.'s profits and revenues, 57% and 26% respectively in 2000, according the company's annual report. "A merger of our Singapore operations with those of Keppel Capital will result in substantial opportunities for revenue enhancement and cost savings," OCBC Vice Chairman and Chief Executive Alex Au said.
"We've done a thorough analysis of the expected synergies, but for regulatory reasons, we cannot divulge further information at this time. We hope to furnish more details in our formal offer document," Mr. Au added.
Picking Up the Pace
Analysts have speculated the pace of consolidation in Singapore will hasten as the government liberalizes the sector further, allowing greater competition from foreign banks. Last month, Lee Hsien Loong, Singapore's deputy prime minister who is also chairman of the Monetary Authority of Singapore, said domestic consolidation could soon increase.
OCBC said it has enough money to finance the planned acquisition, though it didn't provide details in a statement to the Singapore exchange. However, people familiar with corporate finance said OCBC may raise up to S$3 billion in Tier 2 capital, probably by tapping the bond market. UBS Warburg, a unit of UBS AG , is sole financial adviser to OCBC for the general offer, and sole lead manager and bookrunner for any financing associated with the transaction.
Moody's Investors Service on Tuesday affirmed OCBC's double-A-3 long-term and Prime-1 short-term foreign-currency deposit ratings, following the announcement of its bid for Keppel Capital. But Moody's downgraded OCBC's bank financial strength rating to single-B from single-B-plus to "reflect the significantly reduced but still strong capital levels that would support the group's enlarged business after the completion of the transaction."
-- Amit Prakash of Dow Jones Newswires contributed to this article.
By Sara Webb and Hasan Jafri Staff Reporters of The Wall Street Journal
June 13, 2001 3:41 pm ET
SAVE
TEXT
SINGAPORE -- The long-awaited consolidation of the banking sector in Singapore took a step forward as the nation's third-biggest bank, Oversea-Chinese Banking Corp. , unveiled a 4.8 billion Singapore dollar (US$2.7 billion) surprise takeover bid for the nation's smallest bank, Keppel Capital Holdings Ltd.
If successful, the acquisition would make OCBC Singapore's second-largest bank by assets, and would generate considerable savings, OCBC said.
However, it isn't a done deal for OCBC. Lim Chee Onn, chairman of Keppel Capital, said late Tuesday, "We are in talks with other local banks, including OCBC, which have indicated interest in [Keppel Capital] and its subsidiaries." Mr. Lim added that while Keppel Capital will evaluate OCBC's offer, "we advise shareholders and warrant holders to take no action until they receive further notice" from Keppel Capital.
Government Pressure
Following the 1997-98 Asian financial crisis, Singapore has been urging domestic banks to merge to survive tougher competition from foreign banks such as HSBC Corp. , Citibank and ABN-Amro.
But there has been little action in recent years in Singapore other than in the state-controlled sector. In 1998, government-controlled Development Bank of Singapore Ltd. acquired the government-owned Post Office Savings Bank, known as POSBank.
HOW THEY COMPARE
Singapore Banks by size at the end of 2000, in Singapore dollars:
Total net profit (billions)Assets after tax* (millions)Development Bank of Singapore 111.21,390United Overseas Bank66.3912.9Oversea-Chinese Banking Corp.59.7840Overseas Union Bank46.6545Keppel Capital26301.5
*For year 2000
Sources: Singapore Exchange Web site, the companies.
While the government has repeatedly prodded Singapore's banks to consolidate, the family-controlled banks have appeared reluctant to give up control of their businesses. There was speculation at one time that OCBC might be interested in acquiring Overseas Union Bank. But that deal never materialized, and Overseas Union had been in talks to sell a stake to BNP-Paribas SA.
OCBC has made "a number of false starts' said Kevin Scully, head of NetResearch in Singapore. Some of OCBC's Internet banking operations have proved unsuccessful, while plans to divest itself of property interests were postponed earlier this year due to unfavorable market conditions, he added.
A 14% Premium
OCBC said Tuesday it will make a cash offer for all Keppel Capital shares at S$3.38 each, a 14% premium to Keppel Capital's closing price of S$2.96 on Monday. Keppel Capital shares closed at S$2.97 Tuesday, while OCBC shares in Singapore rose 2.8% to S$11.
OCBC values Keppel Capital at S$4.8 billion. OCBC said it will offer S$1.01 for each Keppel Capital warrant.
"The acquisition of [Keppel Capital] will represent the next step forward in OCBC Bank's mission to be a world-class financial institution in Asia Pacific," OCBC said. "The combination of the businesses will establish OCBC Bank as clearly the second-largest Singapore bank, enhancing its ability to pursue expansion in its core markets of Singapore, Malaysia and Greater China."
OCBC Bank's offer will be conditional on, among other things, regulatory approvals and OCBC Bank acquiring more than 50% of Keppel Capital.
'Very Cheap'
Analysts said OCBC is offering a relatively low price for Keppel Capital. "It's [1.7] times book, and very cheap," said Sam Chin, an analyst at ABN Amro Asia Securities.
That is in stark contrast to DBS Group Holdings Ltd. 's planned purchase of Dao Heng Bank Group Ltd. , at more than three times book value, said Mr. Chin. "They are buying a bank with the same number of loans as Dao Heng at half the price," he said.
Keppel Capital is the banking arm of government-linked Keppel Corp. , which owns 37% of the lender. Allied Irish Bank PLC has an option to buy 24.9% of Keppel Capital by June 2002. Banking and finance contribute a significant portion of Keppel Corp.'s profits and revenues, 57% and 26% respectively in 2000, according the company's annual report. "A merger of our Singapore operations with those of Keppel Capital will result in substantial opportunities for revenue enhancement and cost savings," OCBC Vice Chairman and Chief Executive Alex Au said.
"We've done a thorough analysis of the expected synergies, but for regulatory reasons, we cannot divulge further information at this time. We hope to furnish more details in our formal offer document," Mr. Au added.
Picking Up the Pace
Analysts have speculated the pace of consolidation in Singapore will hasten as the government liberalizes the sector further, allowing greater competition from foreign banks. Last month, Lee Hsien Loong, Singapore's deputy prime minister who is also chairman of the Monetary Authority of Singapore, said domestic consolidation could soon increase.
OCBC said it has enough money to finance the planned acquisition, though it didn't provide details in a statement to the Singapore exchange. However, people familiar with corporate finance said OCBC may raise up to S$3 billion in Tier 2 capital, probably by tapping the bond market. UBS Warburg, a unit of UBS AG , is sole financial adviser to OCBC for the general offer, and sole lead manager and bookrunner for any financing associated with the transaction.
Moody's Investors Service on Tuesday affirmed OCBC's double-A-3 long-term and Prime-1 short-term foreign-currency deposit ratings, following the announcement of its bid for Keppel Capital. But Moody's downgraded OCBC's bank financial strength rating to single-B from single-B-plus to "reflect the significantly reduced but still strong capital levels that would support the group's enlarged business after the completion of the transaction."
-- Amit Prakash of Dow Jones Newswires contributed to this article.
