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Saturday, 14 November 2009
Guoco a winner, with or without BEA buyout
High hopes of Guoco Group, led by Malaysian chairman Quek Leng Chan, launching a takeover bid for Bank of East Asia have sent shares of the lender surging more than 14 per cent this week.
High hopes of Guoco Group, led by Malaysian chairman Quek Leng Chan, launching a takeover bid for Bank of East Asia have sent shares of the lender surging more than 14 per cent this week.
But the conglomerate could still be deciding on whether it would open a takeover battle against the city’s fifth-largest bank.
“Its intention will be clear if Guoco lifts its stake in the bank to 10 per cent,” a banker familiar with the company said.
Guoco, which has snapped up BEA stock throughout the year, disclosed last week that it had raised its stake in the bank above 8 per cent, entrenching itself as the bank’s second-largest shareholder.
The banker said being a silent investor was not Quek’s style.
“It is likely that he will ensure that major obstacles have been removed before staging a takeover,” the banker said, adding that seeking the Hong Kong Monetary Authority’s approval was crucial.
Anyone who wants to take 10 per cent or more of a bank must first get the watchdog’s approval. The probability that the HKMA would say no to Quek is low because of his good track record, but he will not want to take any unnecessary risk before getting the endorsement.
Guoco bought Dao Heng Bank Group, a smaller lender, in early 1982 and spent about 10 years transforming it into a mid-sized bank, helped by acquisitions including Hang Lung Bank in 1989 and Overseas Trust Bank in 1993. It sold Dao Heng to DBS Group Holdings at 3.5 times book value in 2001.
Since then, Quek has been looking for opportunities to re-enter Hong Kong’s banking sector even though Guoco’s partly owned Hong Leong Bank has a branch in the city, albeit with a small presence.
Guoco has been eyeing BEA for a long time. Quek had talked with BEA chairman David Li Kwok-po well before the sale of Dao Heng on a possible merger of the two banks, the banking source said, adding that the Malaysian group was likely to stage a takeover bid if it obtained the HKMA’s approval.
A local newspaper reported yesterday that Guoco had appointed a head-hunting company to form a team for the takeover exercise.
A spokesman at Guoco declined to comment.
Citigroup said in a report that unless Guoco was willing to make a general offer at a big premium, a takeover of BEA was not a sure win.
The brokerage said Guoco might stop or slow its buying of BEA shares after a certain price level, but “this could be a long-drawn battle rather than a quick resolution”.
But Citi said Guoco could benefit, whether it succeeded in a takeover or sold its shares to a third party.
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Guoco a winner, with or without BEA buyout
Maria Chan
14 November 2009
High hopes of Guoco Group, led by Malaysian chairman Quek Leng Chan, launching a takeover bid for Bank of East Asia have sent shares of the lender surging more than 14 per cent this week.
But the conglomerate could still be deciding on whether it would open a takeover battle against the city’s fifth-largest bank.
“Its intention will be clear if Guoco lifts its stake in the bank to 10 per cent,” a banker familiar with the company said.
Guoco, which has snapped up BEA stock throughout the year, disclosed last week that it had raised its stake in the bank above 8 per cent, entrenching itself as the bank’s second-largest shareholder.
The banker said being a silent investor was not Quek’s style.
“It is likely that he will ensure that major obstacles have been removed before staging a takeover,” the banker said, adding that seeking the Hong Kong Monetary Authority’s approval was crucial.
Anyone who wants to take 10 per cent or more of a bank must first get the watchdog’s approval. The probability that the HKMA would say no to Quek is low because of his good track record, but he will not want to take any unnecessary risk before getting the endorsement.
Guoco bought Dao Heng Bank Group, a smaller lender, in early 1982 and spent about 10 years transforming it into a mid-sized bank, helped by acquisitions including Hang Lung Bank in 1989 and Overseas Trust Bank in 1993. It sold Dao Heng to DBS Group Holdings at 3.5 times book value in 2001.
Since then, Quek has been looking for opportunities to re-enter Hong Kong’s banking sector even though Guoco’s partly owned Hong Leong Bank has a branch in the city, albeit with a small presence.
Guoco has been eyeing BEA for a long time. Quek had talked with BEA chairman David Li Kwok-po well before the sale of Dao Heng on a possible merger of the two banks, the banking source said, adding that the Malaysian group was likely to stage a takeover bid if it obtained the HKMA’s approval.
A local newspaper reported yesterday that Guoco had appointed a head-hunting company to form a team for the takeover exercise.
A spokesman at Guoco declined to comment.
Citigroup said in a report that unless Guoco was willing to make a general offer at a big premium, a takeover of BEA was not a sure win.
The brokerage said Guoco might stop or slow its buying of BEA shares after a certain price level, but “this could be a long-drawn battle rather than a quick resolution”.
But Citi said Guoco could benefit, whether it succeeded in a takeover or sold its shares to a third party.
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