Singapore's OCBC makes bid for rival Keppel Tat Lee

Singapore's OCBC makes bid for rival Keppel Tat Lee

SINGAPORE (AFP): Singapore's Overseas Chinese Banking Corp.
Ltd. (OCBC) on Tuesday launched a S$4.8 billion (US$2.65 billion)
offer to buy Keppel Capital Holdings (KCH), owner of Keppel Tat
Lee Bank.

The all-cash move was the latest development in a shakeout of
the Singapore financial sector which is being encouraged by the
government to make the industry more competitive globally.

The takeover would make OCBC the second largest bank in the
city-state, after the Development Bank of Singapore Ltd., and
reduce the number of domestic banks to four.

Bank officials said it would enhance OCBC's ability to pursue
expansion in its core markets of Singapore, Malaysia and Greater
China.

"With a strong home base, we will be in a better position to
expand regionally," chief executive Alex Au said in a media
briefing.

OCBC's offer includes a price per share of 3.38 dollars for
Keppel Capital, representing a 14 percent premium over the
closing price of 2.97 dollars Tuesday, and a 32 percent premium
over the 90-day average price.

Au said the acquisition would result in better economies of
scale and distribution networks.

"The stakeholders of KCH -- customers, employees and partners
-- will benefit from joining forces with OCBC Bank and going from
strength to strength as we build a world-class financial
institution in Asia-Pacific," he added.

The proposed acquisition is scheduled to be completed in the
third quarter and is conditional on OCBC obtaining more than 50
percent of Keppel Capital.

Credit rating agency Moody's Investors Service said the
acquisition would enhance OCBC's "already excellent cost
efficiency" and increase its pricing power, which are "very
important in Singapore's increasingly open and competitive
market."

It affirmed OCBC's "Aa3" long-term and Prime-1 short-term
foreign currency deposit ratings, but downgraded its financial
strength rating from "B+" to "B" to reflect the "significantly
reduced, but still strong capital levels" that would support the
group's enlarged business.

"Looking to the future, a larger base in Singapore would
provide a foundation of more stable earnings to protect creditors
as OCBC Bank ventures out into the region," it added.

OCBC has total assets of $60 billion and a staff of 6,400 in
89 branches and representative offices in 13 countries. In 2000,
it reported a net profit of $840 million.