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.